When land acquisition may cost councils more than market value

When I spoke at the recent Local Government Property Professionals Conference on owner-initiated hardship applications, a couple of key points arose around hardship applications.

Public purpose: Acquisition provisions must operate meaningfully and effectively.

In Calarco and Anor v Liverpool City Council [2018] NSWSC 217, the Supreme Court made it clear that the hardship provisions of Land Acquisition (Just Terms Compensation) Act 1991 are intended to operate in a practical and realistic fashion.

In this case, the plaintiffs, Giuseppe and Antonetta Calarco, owned a parcel of land in Austral composed of two portions. One portion was zoned RE1 Public Recreation and the other zoned SP2 Infrastructure and marked “Local Drainage” under the State Environmental Planning Policy (Sydney Region Growth Centres) 2006.

Council had argued that while it was required to acquire the portion of land zoned RE1, the land zoned SP2 was not reserved by the EPA for a purpose referred to in the former section 26(1)(c) – now section 3.14(1)(c) – and therefore was not designated for acquisition for public purposes. On this basis, Council argued that it was not required to acquire that land.

The court held that such an interpretation would leave the plaintiffs with part of the land which could not be meaningfully used, let alone sold. Council must act in a manner which would allow the compulsory acquisition provisions to operate meaningfully and effectively with respect to private property rights.

The upshot of this case is that if land is reserved for one of the requisite public purposes and is subject to a successful hardship application, it must be acquired by Council.

Compensation: When ‘generous and liberal’ lights the way

Confusion often arises in hardship applications about the amount of compensation payable to landowners under section 26 of the EPA Act.

Section 26 provides that:

The special value of land, any loss attributable to severance or disturbance and disadvantage resulting from relocation (as referred to in Part 3) need not be taken into account in connection with an acquisition of land under this Division, despite anything to the contrary in that Part.

The best guidance for determining compensation in hardship applications can be found in Hoy v Coffs Harbour City Council [2016] NSWCA 257. In this case, the Court of Appeal held that the words ‘need not’ give the Valuer- General a discretion to take the matters in section 26 into account. The court made clear that such provisions should be construed generously and liberally because they protect the interests of those whose property rights have been damaged – in this case by the land being designated for public purposes.

In this case, the Land and Environment Court commissioners had the discretion to make an allowance for disturbance and solatium (now known as disadvantage resulting from relocation). This decision is consistent with the Second Reading Speech introducing the 1991 Act into Parliament.

So councils should be aware that, in hardship applications, they may need to pay landowners more than market value for the land being acquired.

Author: Peter Barakate

Leading partner: Craig Munter