Property Law - Compulsory acquisition of land in Victoria by Government Departments, Victorian Statutory Authroities such as VICroads and by Municipal Councils

From time to time, Victorian State Government Departments, Victorian State Instrumentalities such as VicRoads, and Municipal Departments wish to obtain privately owned land for public purposes such as proposed road widening. 

The process under which privately held land can be compulsorily acquired in these circumstances is set out in the Land Acquisition and Compensation Act (Vic.) ["Compensation Act"].

Under the Compensation Act, land required for a public purpose can be acquired by these State Government Departments and Agencies.  This acquisition can be done either compulsorily or by negotiation.  The Compensation Act sets out the process to be followed and how compensation is to be determined. 

The purpose for the acquisition could be new roads, freeways, road widening/deviations, parks, reservoirs, sewerage works, drainage and for public reserves. 

If any State Government Department or Agency (called an Authority in the Compensation Act) intends to acquire an interest in land, that Authority must serve upon any person who has an interest in the land, a notice of intention to acquire that interest.  An interest can be either the legal registered title or an equitable leasehold interest.  The form of the notice must be in accordance with Section 8 of the Compensation Act and give certain title details.  The service of the notice of intention to acquire places restrictions upon the legal and equitable interest holders of the property being targeted.  For instance, under Section 12, the recipient person cannot, without the consent of the authority, sell their interest in the land or pass the lease or make any improvements on the land of a durable nature.  Mortgages, however, can continue to be discharged or entered into.  

The purpose of the notice of intention to acquire an interest in land is to place all legal owners and the leaseholders on notice of the Authority's future intention.  After the expiration of at least two months under Section 20, the Authority can then serve a notice of acquisition in the prescribed form.  The effect of the notice of acquisition is that the target person's interest in the land immediately transfers to the Authority. 

The Compensation Act then sets out the basis upon which the person's whose interests have been compulsorily acquired may receive compensation.  This is Part 3 of the Compensation Act. 

Section 31 obliges the Authority to make an initial offer of compensation after the notice of acquisition has been published.  The offer must set out the amount that the authority has assessed as a fair and reasonable estimate of the amount of compensation payable to the claimant.  The offer must be accompanied by a certificate of valuation.  The Victorian Government has published guidelines whereby the Valuer-General Victoria views properties.  "Low sensitivity" acquisitions, where the value is less than $250,000.00, do not require certified valuations by the Valuer-General Victoria.  In those circumstances, the Valuer-General Victoria will normally appoint a valuer from the Victorian Governmental Panel.  "Medium" sensitivity or properties valued at more than $250,000.00 but less than $500,000.00, generally require a valuation by the Valuer-General Victoria's Panel and certified by the Valuer-General Victoria.  "High sensitivity" acquisitions require a valuation from the Valuer-General Victoria rather than from his panel or from the general Government Panel. 

Section 33 of the Compensation Act sets out the target person's response is either to serve a notice of acceptance on the Authority or a notice of dispute.  Both must be in the prescribed form annexed to the legislation.  Section 36 then gives the right to the Authority to reply to the landowner or tenant. 

The Compensation Act sets out a mechanism in Part 10 for the determination of disputes.  The Victorian Civil and Administrative Tribunal (VCAT) has jurisdiction to hear disputed claims for compensation which do not exceed $50,000.00.  For any amounts in excess of $50,000.00, the claimant has the option of either having the dispute heard in the Victorian Civil and Administrative Tribunal or in the Supreme Court.  If either the claimant or the Authority believes that the issues in dispute raise questions of unusual difficulty or of general importance, then the Supreme Court may decide to hear the case irrespective of the amount in dispute. 

Generally, claimants would be best advised to pursue a case at VCAT unless there were particularly complex questions of law or of fact involved.  VCAT has specialist procedures for expedited hearings and mediations.   VCAT also has a range of specialist members who may have direct real estate or valuation experience.  The Supreme Court, on the other hand, has skilled lawyers sitting as judges who are expert in the determination of complex questions involving statutory interpretation or valuation practice and procedure.  Another important point to bear in mind is that the costs involved in bringing a case in the Supreme Court of Victoria challenging an Authority's offer of compensation will be far greater than a similar case brought at VCAT. 

It is worth remembering that the normal costs rule in the Supreme Court is that the winning party is entitled to receive a proportion (somewhere between 50% and 70% of its costs) from the losing party.  The general rule at VCAT set out at Section 109 of the Victorian Civil and Administrative Tribunal Act  1984 (Vic.) is that each party will bear their own costs irrespective of winning or losing unless the Tribunal is satisfied that the losing party has been responsible by its actions in either delaying the outcome of the claim or that there are some other reasons why the winning party should be entitled to receive a proportion of its costs.

An important section within Part 10 is Section 91.  This section empowers either VCAT or the  Supreme Court, when deciding whether or not to award costs in favour of any party, to take into account the following consideration:

• The amount of compensation awarded by the Tribunal or Court as compared with the amount offered by the Authority.  In other words, even though the claimant has been victorious, if the amount of the "victory" is trivial, the claimant may not be entitled to his or her or its costs which might be very considerable;
• The extent to which the proceedings have arisen from unreasonable conduct on part of the claimant or the Authority, or the failure of the claimant to give appropriate particulars of the claim or supply supporting material, or an excessive claim by the claimant, or an unduly depressed offer by the Authority. 

Section 37 of the Compensation Act also allows a person who is entitled to claim compensation for compulsory acquisition from an Authority to make a claim for that compensation even if the Authority has not made an offer.  In other words, if a title-holder or tenant realizes that an Authority will wish to acquire property in the foreseeable but has not yet received the notice of intention to acquire, the legal or equitable title-holder can initiate the claim for compensation under Section 37.  This enables the owner or tenant to "get in first" and to possibly negotiate a more favourable deal rather than waiting for the last possible moment where the Authority may be much less inclined to be generous.

Under Section 41, the amount of compensation payable to a claimant must take into account a number of factors as follows:

• Market value of the interest on the date of acquisition;
• Any special value to the claimant on the date of acquisition;
• Any loss attributable to severance;
• Any loss attributable to disturbance;
• The enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land;  and
• Any legal valuation or other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

For the purposes of this part of the Compensation Act, the expression "market value" is determined by valuations which will have been obtained depending upon whether the property to be acquired is defined as High Sensitivity, Medium Sensitivity or Low Sensitivity.

Section 44 is entitled "Solatium".  This section provides that the amount of compensation otherwise payable under Part 4 may be increased by an amount not exceeding 10% of the market value of the land by way of Solatium as is reasonable to compensate the claimant for intangible and non-pecuniary disadvantages resulting from the acquisition. 

Part 5 of the Compensation Act provides for compensation by a person with an interest in land (either the legal or inequitable leasehold interest) who sustains pecuniary loss or any expense as a direct or reasonable consequence of the Authority deciding ultimately not to proceed with the compulsory acquisition.  Compensation is provided for reimbursement of experts' expenses such as valuers and lawyers, or for any loss of business where the property was temporarily compulsorily acquired and then released by the Authority who ultimately decides not to proceed with the compulsory acquisition.  Claims like lost rent, or a reasonable rent whilst the owner was dispossessed, loss of business and custom, would be claimable under Section 46 and 47.

Part 8 gives the Authority the power to purchase or redeem the interest of any mortgagee in an interest in land acquired for the purposes of a Compensation Act.  Ultimately, the mortgagee must accept the Authority's repayment of the mortgage. 

Under the Environment Protection Act 1970 (Vic.), if land is found to be polluted or contaminated in a way likely to cause a health or environmental impact, the Environment Protection Authority may serve a notice requiring the land to be cleaned up to a specified standard.  That clean-up notice may be served on:

• The current occupier of the site;  and
• Any person or body who has caused, permitted or contributed to the contamination of the site during its occupation.

Accordingly, the guidelines require each Agency or Authority to make sufficient enquiry of the nature of present and past users to which the land may have been put so as to work out a history of the site and whether there is any visible contamination or odour.   Environmental consultants should be engaged to undertake site assessments if there is any doubt. 

If an Agency or Authority is selling land that is contaminated, it will need to make a decision on whether to clean up the site or sell it in its contaminated condition.  Where purchase is contemplated for public purposes, the nature of the end use will determine whether the purchase should be abandoned or further legal and appropriate technical advice be obtained to determine the options available to contain or remove the contamination. 

If the compulsory acquisition does proceed, the Authority may insist on imposing warranties and indemnities upon the seller relating to clean-up obligations to be undertaken within a certain time-frame and to a regulated and approved extent pursuant to EPA guidelines. 

The compulsory acquisition of interests in land, particularly land used for business, commercial or retail purposes, is complex.  Often, the owners of land or tenants on the land are entitled to obtain advice from suitably qualified and experienced lawyers.  Normally, the reasonable costs of obtaining such advice will be reimbursed by the Authority as part of the compensation payment process.