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What you are entitled to as compensation after an Government acquisition?
The Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) dictates what landowners are entitled to as part of an acquisition. This post will provide an outline of the relevant sections of the Act that you should know about and what you may be entitled to. Section 55 of the Just Terms Act is critical information. It outlines the “Heads of Compensation” that are applicable as part of a compulsory acquisition. Section 55 is shown below: “55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division)— (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.” Different Heads of Compensation from the above are applicable depending on if the property is owner occupied, an investment, residential or commercial. Before we delve too far into the detail, its worthwhile defining a jargon term that will pop up regularly. That is, what is the Public Purpose? The Public Purpose is the reason the compulsory acquisition is required. Common examples are road widening or to construct infrastructure (airport, school, hospital, rail network, etc). Now let get to the reason why were all here. What are you entitled to as part of your compensation figure? This post will focus on residential property. The heads of compensation will be covered individually below: 55 (a) Market Value The market value of the property is defined in the Just Terms Act under Section 56(1). The individual sections have not been quoted but you can find them all in the Just Terms Act. Section 56 entitles the landowner being compensated to the market value is the property being acquired disregarding the public purpose for the land being acquired. Disregarding the public purpose means the valuation has to exclude the value of any disadvantage or benefit that would result from the Public Purpose. An example of a disadvantage is when you previously were in a quiet location and after the acquisition, your property will suffer from aircraft noise impacts. A common example of a benefit is a rezoning allowing a higher density use because of proximity to a new railway station. If the railway station didn’t exist, the land would probably would not be rezoned. However, most examples are not as black and white. This is where expert town planners often get involved and can point to what would have happened if the public purpose didn’t exist. 55 (b) Special Value Special value is value that the property has to the owner that doesn’t get captured in the market value. Things like modifications to a dwelling to allow wheelchair access. These modifications would be expensive to install but don’t attract any value to the broader market. Special value claims are typically rare. 55 (c) Severance, Severance is applicable if the acquisition bisects or severs the land from other lands. For example, a freeway cuts a parcel in half and the half of the land can no longer be accessed. The affect on value would be significant. This is a rare occurrence these days as most acquiring authorities will either acquire the whole parcel and make efforts to not to have severed parcels in the planning stage of the project. 55 (d) Disturbance, Covered in Section 59 of the Just Terms Act. Disturbance costs relate to:
- legal costs and valuation fees reasonably incurred – You get reimbursed for valuation fees (as long as the valuer is appropriately qualified like the team at Titan) and legal fees incurred.
- financial costs reasonably incurred - examples of this include including mail forwarding, mortgage discharge, removalists fees etc.
- stamp duty costs up to the equivalent value of the property being acquired - this only relates to owner occupied properties only,
- If you are running a business from the premises, there may be additional impacts that would result from business disturbance here.
What do you do when the Government wants to compulsorily acquire your property?
Have you recently been notified by the government because your property will form part of a road, rail or other infrastructure project? Given the amount of infrastructure projects going on in NSW at the moment, it’s no surprise. The amount of people affected by new infrastructure projects is now greater than ever. When a Government authority acquires property, they have to work within the rules of legislation called the Land Acquisition (Just Terms Compensation) Act 1991. They are also required to negotiate with owners using a valuation of the as a basis of the negotiation discussions. The steps that follow are usually (but vary slightly depending between authorities): Initial contact You are notified that your property is in the alignment of a proposed infrastructure project. Offer to purchase The acquiring authority makes an offer to buy your property using their valuation as a basis of their offer. Valuation Exchange You send the valuation you complete to the acquiring authority they send you their valuation in return. This is the start of the negotiation process. Valuers Conference The owners, acquiring authorities and respective valuers meet to discuss the valuations and their shortfalls with a view to try to reach come common ground. This process can occur multiple times depending on the market conditions or the complexity of the property being acquired. Updated Offers The authority sends you a revised offer based on these. This is accepted or rejected by the owners. The property either settles from here or goes to the compulsory acquisition process. PAN period If a settlement cannot be reached through negotiation, A PAN (or Proposed Acquisition Notice) is issued to the owners of the property notifying them of a notice period (typically 60-90 days) that the government will use its compulsory powers. Eleventh hour negotiations with the acquiring authority can still occur during this period. Gazettal After the notice period in the PAN concludes, the property is published in the NSW Government Gazette. The property has then been compulsorily acquired by the authority becomes the property of the government authority. The owners have not been paid anything for their property yet however. Valuer General Valuation A third valuer engaged by the Valuer General (VG) to complete an impartial valuation. Part of their role includes consideration of the valuations completed to date over the property and consideration of all the features of the are applicable to the property. The result of this valuation will become the eventual compensation amount that you will be paid. Generally within around 42 days of the date of Gazette. Appeal If the compensation amount provided by the VG is not acceptable, you have the right to appeal this valuation to the Land and Environment Court of NSW. This is another detailed process that will be covered in a later post.
All of this might be very daunting and confusing, but what do you do now?
- Engage a valuer early and make sure they are experienced with the Land Acquisition (Just Terms Compensation) Act 1991 – Our team works on these valuations daily and has all the experience you need to help get the best outcome,
- You will need a solicitor that also knows the process and legislation well – Titan works with, and can recommend several solicitors that work frequently with this type of acquisition,
- Remember that good negotiated outcome is often better than a hard fought one. Use this to your advantange and try to get an outcome that is mutually beneficial and less stressful for everyone.
- Your outcome and your experience will only be as good as the advice you are getting. Get the best advice you can find. This sounds expensive but assured, valuation and legal fees get reimbursed by the Acquiring Authority as part of the Acquisition process – check out our post on what you are entitled to find out what you are actually entitled to in accordance with the legislation.
- A good valuer will also point you in the direction of other advice if required, we regularly work with business valuers, engineers, town planners and contamination experts to make sure you have the most accurate and best advice you can get in what is a very stressful and daunting experience.