Compulsory acquisition has been in the news again – it’s never easy for someone to find out that their property is going to be acquired for the purpose of a road or rail project. So how is compensation assessed?
The acquisition of property for major infrastructure projects is usually administered by state governments under major project laws.
Under these laws, residents and property owners (including people or businesses who rent) who are made aware of the potential acquisition of their business or home, are entitled to receive fair compensation for the interest in their property, and must put a strong case to the relevant authority.
When it comes to compulsory acquisition, there are five factors that have to be considered by the acquiring authority or government when assessing the compensation payable to landholders:
- The market value of the property, as at the date of acquisition. This is usually the largest component of the claim.
- Where only part of the land is acquired, a “before-and-after” assessment of the value of the property is conducted to ascertain the difference in the market value of the property before and after the acquisition.
- Any expenses incurred as a consequence of the acquisition (e.g. removalists) as well as costs associated with purchasing a replacement property (e.g. stamp duty).
- Reasonable professional expenses, such as legal, valuation or accounting expenses, incurred in relation to the acquisition of the land.
- Compensation for intangible losses, such as emotional connection to the property or the inconvenience suffered as a result of the move or the search for a suitable replacement property, schooling and employment.
Landholders have the right to challenge the authority’s assessment of compensation but must produce evidence in support of their claim for a higher amount.
Challenging the authority’s assessment of the market value of the property will often involve engaging a valuer, through a lawyer, to prepare a valuation report for the property. The valuation may have regard to the property’s highest and best use rather than its current use if, for example, the property has development potential. Claims for expenses must also be supported by documentary evidence where possible.
Landholders who are made aware of a possible acquisition of their property are advised to seek legal advice as soon as possible. Lawyers can walk clients through the acquisition process and will assist them with preparation of their claim, which may include a reimbursement of reasonable legal expenses if their land has been acquired.
While people may agree with the aim of the project, it becomes very personal when it’s your home, business or carefully selected investment on the line. There will always be people who don’t want to leave their properties and everybody will always want the best possible outcome.