Posted on August 7, 2012 by Megan Hawley
Determining market value of land zoned for a public purpose
A recent case has succinctly set out the steps to be followed to determine the market value of land zoned for a public purpose, and the compensation payable for the acquisition of that land under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act).The case of Davies v Sydney Water Corporation  NSWLEC 130 involved the acquisition of land by Sydney Water. The land was zoned Special Uses 5(a) ‘Trunk Drainage’ under the relevant local environmental plan.
Under s55 of the Just Terms Act the market value of the land on the date of its acquisition is a relevant matter to be considered when determining the amount of compensation to
which a person is entitled.
Market value is defined in s56 of the Just Terms Act as follows:
“56 Market value
(1) In this Act:
market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not
anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):
(a) any increase or decrease in the value of the land caused by the carrying out of, or the
proposal to carry out, the public purpose for which the land was acquired …”.
Craig J followed a three step approach to determine the increase or decrease in the value of the land caused by the carrying out of the public purpose for which the land was acquired. This approach has been endorsed by the Court of Appeal in Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (No 2)  NSWCA 386.
Those three steps are as follows:
- Identify the zoning of the land at the date of acquisition;
- Determine whether the imposition or retention of that zoning was part of the carrying out of the public purpose or part of the proposal to carry out the public purpose for which the land was acquired; and
- If it is, that zoning is notionally set aside and the market value is determined by considering how the land would have been zoned, at the date of acquisition, but for the proposal to carry out the public purpose.
The first step is clearly straight forward. However, the second and third steps may involve complex planning evidence regarding the history of the zoning of the relevant land and neighbouring land.
The underlying zoning of the land can have a significant effect on the market value of the land, and compensation payable.