Will I get a fair buyout from the government?
As the Australian population continues to grow, so do our needs as a nation, whether it’s the need for new transport links or the development of power stations that harness renewable energy.
Unfortunately, the expansion of government projects invariably brings with it the compulsory acquisition of property, a constitutional right of the Commonwealth that homeowners have little say in.
So what are your rights, how does it work and will you get a fair compensation at the end of it?
What is compulsory acquisition?
“Compulsory acquisition” occurs when a government department or institution acquires privately-owned land or property for the purposes of building public works.
This could be new infrastructure, the expansion of existing networks or for a multitude of other uses at the federal, state and local government area (LGA) level.
You may either own the land outright or you could have a mortgage over it.
The term “compulsory acquisition” is actually a legal term and legislated under Section 51 (xxxi) of the Constitution of Australia.
It states that the Commonwealth can acquire property “on just terms from any State or person for any purpose”.
The key here is the term “just terms”.
With strong enough evidence, it’s possible to fight compulsory acquisition in federal court but, more often than not, the government comes out on top.
Who can acquire my land?
The federal government, a state or territory department or an LGA.
Such departments and agencies include:
- The Department of Defence.
- A local or state water supplier like Queensland Urban Utilities.
- A state transport network provider like Public Transport Victoria.
- A state roads authority such as Roads and Maritime Services (RMS) in New South Wales.
Reasons for compulsory acquisition
- The construction or expansion of roads, highways and motorways.
- The construction or expansion of train lines and light trail networks.
- A new domestic or international airport.
Sometimes sites become contaminated, whether it’s soil and sediment from mining, waterways through fracking or the impact of air pollution from similar industrial activities.
During times of war or natural disasters like bushfires and hurricanes, land can be compulsorily acquired for a multitude of reasons.
This includes for use as a training base, medical centre or refugee camp.
The government doesn’t always want all the land
When you think of a compulsory acquisition, large infrastructure projects come to mind.
Think the airport and the Kerrigans in 1997’s The Castle.
However, in a lot of cases, the government may only take over a part of your land, such as an easement, your driveway or your garage.
This is quite common on rural acreages where there is less existing infrastructure.
Other times, the “acquisition” may be the compulsory ending of an ownership right over the property.
This means you could be prevented from undertaking certain renovations or building work on your property including installing an antenna, erecting or renovating a building above a certain height, or digging below a certain point.
This may stop you from installing a pool or, if you’re on rural land, undertaking bore water drilling activities, building a shed or erecting a barn.
In other circumstances of compulsory acquisition, the government may require temporary access through your property to improve the property or land that will be used for a public purpose.
Can the government just take over my land?
The government can compulsorily acquire your land whether you want to sell or not.
Other times you can be acquired if you have trouble proving your title of ownership or if you can’t be contacted by the government for any reason, such as being overseas.
There are actually three types of acquisitions
Most often, acquisitions are made through “compulsory acquisition”.
However, land can also be acquired through negotiated agreement, whereby you and the government agree to the terms of the agreement and the amount of compensation.
In cases of national emergency, “urgent acquisition” may be used instead.
This means that during times of national emergency, such as war, the government can take over your land with as little as 3 days notice.
What’s the acquisition process?
Although the Commonwealth’s rights are set out in the Constitution, the acquisition process itself is set out in the Lands Acquisition Act 1989.
- You must be told in advance of the Commonwealth’s decision via a Notice of Intention to Acquire Land.
- You have the right to ask an independent body to assess the Commonwealth’s decision to acquire your interest.
- You have a right to professional advice so you know where you stand and this can be paid for by the Australian government.
- You have a right to be compensated on just terms.
This is the basic process although it can vary slightly from state to state.
For example, some states and territories implement so-called “public acquisition overlay” before proceeding to the compulsory acquisition stage.
So instead of the 6-month notification period, residents are usually given a longer period of consultation.
The pre-acquisition phase
This is the stage at which you’re notified of a possible compulsory acquisition.
The notification spells out why the government wants to acquire the land and what public purpose it would be suitable for.
An authorised government official has the right to access your land 7 days after you receive the notification.
You have the opportunity to appeal
You have 28 days after receiving the pre-acquisition declaration to make an appeal in writing to the Minister for Finance and Deregulation.
You should independent legal advice when appealing in order to build a strong case.
Once you’ve submitted your appeal, you will receive a reply and the reasons for the decision made by the government within 28 days of receiving the appeal.
If your request is denied, you can appeal to the Administrative Appeals Tribunal (AAT) to review the Commonwealth’s decision.
The only exception to this appeals process is if it’s an urgent acquisition.
The Commonwealth acquires the land
If appeals to the AAT fail, the Minister will issue an official acquisition declaration and you’ll receive:
- A copy of the Notice of Acquisition declaration.
- A notice telling you that you can claim compensation.
- A compensation claim form.
You can typically remain on the land for at least 6 months after receiving the acquisition letter.
During this time, you can review the terms of the acquisition with the Minister and the AAT if need.
You should also take the time to complete the compensation claim form.
During this time, you cannot undertake the following without written consent from the acquiring authority:
- You can’t sell the property.
- Enter into a new lease.
- Make improvements to the property.
What happens if the Notice of Acquisition expires?
If the government doesn’t proceed with the acquisition within the 6 month period, the notice lapses.
At this point, you actually have the right to claim against any loss or damage as a result of the notice of intention.
How does the government work out my compensation?
Within 14 days of receiving the official Notice of Acquisition, the acquiring authority is required to make an offer in writing to each person who has an interest in the land.
Included in the offer will be a copy of a certificate of valuation that the acquiring authority has based their offer on.
The good news for affected homeowners is that valuations are undertaken by your state’s relevant Valuer General based on highest and best use rather than existing use.
This refers to the “fair market” value that you’re entitled to under Section 51 in the Constitution.
This makes sense since using comparable sales in the area wouldn’t take into account the premium that now applies to the property.
This is particularly the case with large infrastructure projects that tend to bring with them more business, more jobs and a wave of gentrification to the surrounding neighbourhoods.
In saying that, valuers are conservative and don’t arrive at a figure the same way that an investor would.
The main thing that can really add value are changes to council planning rules and zoning.
These changes may allow for more business activities such as commercial and industrial work.
For example, your single dwelling residence may be able to be subdivided and developed into an apartment or an office building.
Again, the valuations are based on market value and there’s a chance you could get a better sale price by selling private.
Unfortunately, you don’t have the right to sell the property during the compulsory acquisition process.
Besides the property valuation, you have the right to claim any losses incurred by the compulsory acquisition including:
- The costs of stamp duty, mortgage refinance fees, removalists and other costs associated with buying a replacement property.
- Legal, valuation and accounting expenses related to the acquisition of the land.
- Compensation for “intangible losses” such as emotional connection to the property or the inconvenience of having to find new work or schooling for your children.
Do you need to refinance your mortgage?
If your land is going to be compulsorily acquired by the government, we can’t help you with legal and financial advice.
Certain properties can be difficult to finance, particularly if you’re from a regional or rural area.
Luckily, we’re specialists in getting home loans approved for unique property types.
Please call us on 1300 889 743 or complete our free assessment form to speak with one of our mortgage brokers about your situation.