Posted on July 18, 2013 by

Review of Just Terms Compensation Legislation

The State Government is calling for submissions in response to the Consultation Paper prepared by David Russell SC as part of his review of the  Land Acquisition (Just Terms Compensation) Act 1991 (Act).

What is interesting about the Consultation Paper and the review is what it will not deal with.  David Russell’s terms of review do not include considering compensating landowners in respect of:

• coal seam gas exploration and other mining issues;
• aboriginal land claims;
• impacts of the native vegetation legislation;
• changes in planning law which removes a landowner’s right to undertake previously legal activities on their land.

The terms of reference for the review however are not innocuous.

The Consultation Paper sets up a series of areas for consultation and then records the submissions made, for and against, various propositions.

Compensation Procedures and Timeframes

Transport NSW argues in the Consultation Paper for a shortening of the period of notice of a proposed acquisition before the acuqisition can be effected from 90 to 60 days, and seeking case management for the negotiation process.  As an acquiring authority they are seeking, unsurprisingly, a ‘simplified and expedited compulsory acquisition process‘: Consultation Paper page 25.

Significantly for local government, Transport NSW are seeking a ‘whole of Government approach’ when it comes to acquisitions by Transport NSW of land owned or controlled by local government.  For vacant land, non operational land, unmade roads and the like, they are seeking a streamlined approach with fixed compensation amounts, shorter notice periods and removal of these acquisitions from the Act.

While acquiring authorities want shorter notice periods, community groups have sought longer periods of consultation and the right to face to face meetings with acquiring authorities to put their cases, as well as arbitration processes before an acquisition becomes final.

Hardship

Two Coffs Harbour residents highlighted the other side of the time problem for acquisition, citing an actual case where the time between the nomination of the land as potentially impacted by a highway extension, and the actual acquisition was 11 years.  This submission called for an independent arbitrator to assess such situations.

Gosford Council gave evidence of a similar situation where it applied to the responsible Minister for the issue of a proposed acquisition notice (PAN) and then waited 10 years for the responsible Minister to issue the PAN .  The Council argued that ‘There should be a provision that the person who recommends that the Minister  give concurrence to the issue of a PAN or to decline to issue a PAN, should make the recommendations within 6 months of application by the acquiring authority, and that the concurrence be deemed to have been given unless declined within 6 months after receiving the PAN’: Consultation Paper page 27.

Perhaps the most controversial part of the Review will concern owner initiated acquisitions and the hardship test.  Under sections 21 to 28 of the Act an owner of land can initiate acquisition of his or her land by the acquiring authority, if the owners land has been designated for acquisition for a public purpose. However, to initiate the acquisition, the owner must prove ‘hardship’.  Submissions have been made arguing for owner initiated acquisitions to be removed altogether (chiefly acquiring authorities who want to be able to keep their options open for future acquisitions) and arguing that owner initiated acquisitions should be expanded (for example, the two Coffs Harbour residents who waited 11 years, unable to sell or deal with their land until the acquiring authority made up its mind).

Community groups have argued that it is so difficult to meet the hardship test that owners are effectively denied the chance to compel an agency to acquire their property once it has been designated for acquisition for a public purpose.  This prevents owners being able to either develop their land, or to sell it at a market rate.

The fact that the hardship test is so difficult to meet left one respondent to the Consultation Paper to remark that ‘Together with the ability to designate without serious study, this has led to authorites designating land on a whim’: Consultation Paper page 40.

The Property Committee of the Law Society queried whether the decision not to acquire by an authority could be appealed to the Land & Environment Court, and whether the definition of hardship should be broadened.

Compensation

Interestingly the Law Society queried whether Councils whose ‘open space’ is acquired should be compensated for the cost of acquiring replacement land.  This seems sensible, especially in built up areas where open space is at a premium.

Under the current legislation compensation is payable for:

• market value of the land at the date of acquisition
• any special value to the current owner
• severance
• disturbance
• solatium
• any variation in value of other land owned by the person whose land is acquired

Transport NSW has called fo a review of severance cost (where an aquiring authority acquires part of an owner’s land, and the value of the part that remains is impacted by the removal of the other part through the acquisition).

Solatium

Transport NSW has also called for a review of solatium, the compensation for the non financial loss to a person who loses their principal place of residence in an acquisition.  Currently that loss is capped at $25,520.  It seems mean spirited to ‘review’ solatium in many cases where owners, especially older home owners, lose the residence they have lived in most of their lives, or the home they had planned to retire to.  In some circumstances, $25,000 seems entirely inadequate.

The Valuer General has made submissions concerning the short times it is allowed to make valuations under the legislation, and the fact that it is required to make valuations without sufficient background from both parties: Consultation Paper page 34.

Uplift

The Consultation Paper also looked at a situation that often strikes land owners as unjust:  an acquiring authority takes steps to acquire land and a price is paid, whether by negotiation or otherwise.  For whatever reason, the acquiring authority chooses not to go ahead with the public purpose, and the land is then sold with a significant uplift in value.  Should the owner be allowed to re purchase for the compensation price?

The Consultation Paper asks whether the original owner should be offered a ‘right of first refusal’ of the property at the acquisition price.  It is an important question, because often times it is the proposed acquisition which drives down the value of the property in question in the first place.

Conclusion

The Consultation Paper has set out many of the issues and the submissions already made on them.  Submissions close on 9 August 2013 and there is much in the Consultation Paper which will impact on Councils, landowners and property developers. A copy of the Consultation Paper and the address for any submissions can be found here.