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Government land acquisition reforms offer nothing for business.

20/10/2016

The NSW Government has recognised that the land acquisition process for public infrastructure is difficult and complex.  In 2012, it asked David Russell SC to review the legislation and administrative arrangements in order to make the process fairer and more transparent.  This year, it asked the Customer Service Commissioner (Michael Pratt) to revisit Mr Russell’s recommendations, although the effect of compulsory acquisitions on business was excluded from the scope of his review.   On 18 October, the government announced a number of legislative and administrative measures addressing their recommendations.

The most publicised measure has been to increase the allowance for ‘solatium’ up to $75,000 and to index it to annual increases in the consumer price index.  That sum is intended to cover the inconvenience of forced relocation, as well as the emotional and social costs of establishing new social networks in an unfamiliar area.  However, this head of compensation is available only in the case of a principal place of residence.  No allowance whatsoever is made for non-financial costs arising from the displacement of a business.

” it’s disappointing that the Government has focused on residential markets and overlooked the need for reform in this space “

Businesses face costs and disruptions that are quite different in character and amount to displaced homeowners. For example, a business operator often needs to obtain development and other regulatory consents in order to relocate its business, supported by relevant planning, architectural and engineering advice.  Large scale projects (like the Sydney Metro and WestConnex) affect vacancy rates, incentives and market rents for commercial space.   Displaced businesses can lose local markets and face increased operating costs.  Trading, profitability and goodwill can be impaired in the short- and long-term.  In some cases, relocation is entirely impracticable and the business is rendered unviable.

The legislation currently allows businesses to recover “any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition.”  That’s a broad ‘catch-all’ provision that is poorly understood and inconsistently interpreted by constructing authorities.  The Law Society of NSW advocated for a better, more detailed framework for assessing business claims, but the Government‘s only response has been to encourage greater consistency between acquiring authorities.  It simply promises to monitor outcomes and consider further action in the future.

The proposed changes to the Land Acquisition (Just Terms Compensation) Act 1991:

  • allow six months of negotiations before the compulsory acquisition process can be triggered;
  • require constructing authorities to give the Valuer General a detailed brief about the issues affecting compensation;
  • permit the Valuer General up to 45 days to make its determination (up from 30 days);
  • give the constructing authority up to 45 days to issue a compensation notice after it receives the Valuer General’s determination (up from 30 days);
  • facilitate independent merits review of hardship applications; and
  • where the resumed property is used in a particular way, allow its replacement with a reasonably equivalent property in the exceptional case there is no general market for the property.

A range of administrative changes will also be made with the effect that:
acquiring authorities will negotiate face-to-face with displaced landowners;

  • a central agency will collect and publish data from acquiring authorities;
  • a guide about compulsory acquisition will be published in straight-forward language;
  • dispossessed landowners will have first right of refusal at market value, if the land is not used for the infrastructure project;
  • additional staff will provide greater support to residents with the acquisition, compensation and relocation processes; and
  • the Valuer General process will more closely reflect the expert determination model of dispute resolution.

Given the number of commercial and retail businesses displaced by current infrastructure projects, it’s disappointing that the Government has focused on residential markets and overlooked the need for reform in this space.

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