Compulsory acquisition 

Compulsory acquisition is the power of the State to take land without the owner's consent. It is a statutory power in every Australian jurisdiction, and the legislation both authorises the taking and prescribes what must be paid.

The constitutional guarantee

Section 51(xxxi) of the Constitution empowers the Commonwealth to make laws for the acquisition of property on just terms.¹ It does two things at once:

• it confers power to acquire property; and
• it limits every other head of power, so that a law which effects an acquisition of property must provide just terms even if it would otherwise be supported by another placitum.

The guarantee is confined to the Commonwealth. State constitutions contain no equivalent, and a state may acquire property on whatever terms its parliament prescribes — though in practice every state statute provides for compensation. The Territories position has been contested and is now accepted as attracting the guarantee.

Three limiting concepts recur:

• Property is read broadly, extending beyond land to choses in action, statutory licences with proprietary characteristics, and intellectual property.
• Acquisition requires that some identifiable benefit or advantage relating to the property accrue to the Commonwealth or another. Mere extinguishment or restriction of rights, with no corresponding acquisition, is not caught. This is the distinction that decides most cases.
• Just terms means fair dealing, not necessarily full market compensation in every case, though in practice the two align closely.

Certain laws are treated as inherently outside the guarantee — taxation, forfeiture of property used in crime, and the adjustment of competing claims where the rights taken were inherently susceptible to variation.

Regulation and acquisition

A law restricting how land may be used — a zoning change, a heritage listing, an environmental protection order — reduces value but ordinarily acquires nothing. No proprietary benefit accrues to anyone, and no compensation is payable unless the statute provides for it.

The line is not always clear. Where a restriction is so complete that it strips the owner of every use, and the benefit of that sterilisation accrues to a public authority, an acquisition may be found. But the starting position is that regulation is not acquisition.

The statutory process

The acquisition statutes follow a common pattern:

1. Pre-acquisition notice. The acquiring authority notifies the owner of its intention, states the land affected, and gives a minimum period for negotiation. In most jurisdictions the authority must attempt to acquire by agreement first.
2. Objection and review. The owner may object, and in some jurisdictions may seek review of the decision, though the merits of the acquisition itself are usually not open to challenge.
3. Acquisition notice. Publication in the gazette vests the land in the authority, freed of all prior interests except those preserved. Vesting is automatic on publication and does not depend on registration or on payment.
4. Compensation notice. The authority offers an amount, supported by valuation. The owner may accept or may contest the amount.
5. Determination. Disputes go to the court or tribunal designated by the statute, which determines compensation afresh.

Because vesting occurs at step 3, the owner cannot resist the taking by disputing the amount. The two questions are separated deliberately.

Heads of compensation

The statutes prescribe the matters to be considered. In New South Wales they are listed in s 55 of the Land Acquisition (Just Terms Compensation) Act 1991²:

• Market value at the date of acquisition, assessed on the basis of a willing but not anxious seller and buyer, and disregarding any increase or decrease in value caused by the proposal to acquire. That disregard — the Pointe Gourde principle, now generally statutory — prevents the scheme itself from inflating or depressing the price.
• Special value to the owner beyond market value, where the land has a particular utility that a purchaser would not pay for.
• Severance, where part only is taken and the value of the retained land falls as a result.
• Injurious affection, being the reduction in value of retained land caused by the use to be made of the acquired land.
• Disturbance — the actual costs of being displaced: legal and valuation fees on the acquisition and on a replacement purchase, stamp duty on a replacement, relocation expenses, and losses attributable to relocating a business.
• Solatium, a capped statutory amount for the non-financial disadvantage of being compelled to leave a principal place of residence.
• Any increase in the value of other land of the owner attributable to the acquisition, which is set off.

Interest generally runs from the date of vesting to the date of payment.

Owner-initiated acquisition on hardship

The statutes also work in the opposite direction. Where land has been designated for future public purposes — reserved in a planning instrument for a road, school or open space — the owner is left with land that cannot be developed and is difficult to sell, sometimes for years before the authority is ready to acquire.

Most jurisdictions allow such an owner to require the authority to acquire the land early on the ground of hardship, generally where the owner needs to sell for pressing personal, domestic or financial reasons and cannot do so at market value because of the designation.

Compensation is assessed on the ordinary principles, including the disregard of any value effect caused by the proposal itself — which is the point, since the designation is what depressed the value.

Applying this in a problem question

1. Identify the acquiring polity, because s 51(xxxi) applies only to the Commonwealth.
2. Ask whether there has been an acquisition — a benefit accruing — or merely extinguishment or regulation.
3. For a statutory acquisition, work through the process in order and check that each step was taken.
4. Fix the date of acquisition, since market value is assessed then.
5. Apply the disregard of scheme-related value movement before valuing.
6. Address each head of compensation separately, and do not fold disturbance into market value.

Self-check

• Have I checked whether the acquiring authority is Commonwealth or state?
• Have I asked whether anything was actually acquired?
• Have I disregarded value changes caused by the acquisition proposal?
• Have I dealt with disturbance and solatium as separate heads?
• Have I noted that vesting does not depend on payment?