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Public Works Act 1981 Overview on Acquisition and Compensation for Public Works Workshop : N Pointon, A Roberts and J Haynes
To consider the PINZ Professional Standards.
To note the compensation provisions of the Public Works Act 1981 (“PWA”).
To highlight the compensation assessment principles and processes.
To outline the compensation valuation process - Injurious Affection and Disturbance.
PINZ Professional Standards
Operative standards contained in the Valuation and Property Standards.
Australia and New Zealand - effective 1 October 2009.
ANZ Practice Standard 1- Valuations for Compulsory Acquisition.
ANZ Valuation Guidance Note 5 - Valuations for Compulsory Acquisition.
Valuation must have regard to relevant legislation ie PWA, particularly Part 5 “the basic rules” for compensation assessments. Knowledge of relevant compensation case law.
Valuation must be supported by market evidence and accepted valuation principles. Guidance Note 5 gives guidance on report content.
Departure or non-compliance to disclosed in report. Outline reasons and state impact on report and conclusions reached.
PINZ Professional Standards - continued
Can be appropriate to seek advice of other experts (with client’s consent) to address issues outside valuer’s expertise.
Member may act in advocate role, but must not act as advocate and expert valuer in the same matter.
Expert valuer is independent/impartial and may negotiate on clients behalf in determining valuation issues.
The Public Works Act 1981 Acquisition of Land
Acquisition by Agreement.
Authorises the acquisition of land for a public work by the Minister of Lands or by a Local Authority for any public work for which the Crown or a Local Authority (as the case may be) is responsible.
Section 18: Notice of Desire -
Requires negotiation in good faith for three months.
Starts clock ticking.
Requires advice of estimate of value of land based on registered valuer’s report.
Remains in effect for 12 months but new notice can be issued at any time.
The Public Works Act 1981 Acquisition of Land - continued
Section 23 - Notice of Intention: -
Requires Registered Survey unless acquiring whole title (Section 32).
The notice expires after 12 months of its gazettal, unless the land is taken by proclamation or there is confirmation of the intention to take or subject to inquiry.
If reconfirmed remains in effect for a further two years.
Right of objection to Environment Court within 20 working days of service.
If objection lodged - remains in effect until three months following withdrawal or judicial decision.
If period expires before proclamation issues taking the land - can’t be repeated for at least six months.
The Public Works Act 1981 Acquisition of Land - continued
Section 26 - Proclamation: -
Recommendation made to Governor-General following expiry of objection period, withdrawal of objection, or final disposal of objection.
Proclamation must be published in gazette within one month of signing.
Land vests absolutely free of all charges and restrictions 14 days following publication.
Following publication - proclamation is registered in Land Titles Office.
The Public Works Act 1981 Acquisition of Land - continued
Section 24 - Objection - matters considered: -
Objectives of Minister (reason for requirement for the land).
Adequacy of consideration of alternative sites, routes, methods of achieving objectives (Court will look at only whether adequate consideration has been given - it will not substitute its view as to the best option).
Whether acquisition fair, sound and reasonably necessary (can only take land actually required).
Appeal only available on questions of law.
Note: Dispute as to compensation is not relevant.
Compensation needs to be determined by agreement or reference to Land Valuation Tribunal (“LVT”). Interest payable from date of publication until date of payment.
Acquisition of Land for a Public Work Severances
An owner could seek to have a severance area acquired by the designating authority Section 119 PWA (when land declared road under Section 114 PWA) and Section 34 PWA. Severed land has to be “significantly less useful to the owner or more costly to retain at the same standard”.
The Public Works Act 1981 Entitlement to Compensation Section 60 PWA:
Entitlement to compensation where land is acquired or taken.
Requires full compensation which is in short the principle of “no better no worse”.
Includes the entitlement to injurious affection to land resulting from the acquisition or taking of “other land” from the owner for a public work.
Acquisition of Land for a Public Work Assessment of Compensation Section 62 PWA:
Current market value.
Before and after - partial acquisition.
Effect on value created (either up or down) by the prospect of the work to be disregarded.
Special suitability to be disregarded.
Betterment to be offset.
Acquisition of Land for a Public Work Betterment Section 62(1)(e):
Before and after valuations sets the basis for the establishment of betterment.
Betterment is the increase in value of land of the owner that is injuriously affected, and in the value of land of any other land in which an owner has an interest, that is caused or is likely to be caused by the work or the prospect of the work.
Can be deducted to the extent of the market value of land payable for the land taken or acquired, and the injurious affection to land arising from the taking.
Must be linked to the specified date.
Landowners are not charged for betterment under PWA.
Section 326 Local Government Act 1974 allows Betterment to be charged by the Local Authority.
Acquisition of Land for a Public Work Assessment of Injurious Affection
Before and after assessment sets the basis for the establishment of injurious affect.
This is the most distinguishing feature of compensation valuation.
Section 64 PWA.
Compensation for injurious affection to the land retained by the owner must be assessed with reference to the entire work to be constructed, and not just the work constructed on the part acquired or taken.
As it is the affect of the whole works, issues of noise, lights etc can be reflected in injurious affect.
Injurious affect can be seen as having a greater value affect to a particular owner BUT not reflected in the market value; sentimental attachment.
Acquisition of Land for a Public Work Compensation for Land for which no General Demand Exists Section 65 PWA:
Allows for compensation through equivalent reinstatement (of land and buildings) in specific and quite limited circumstances.
The land must be devoted to a purpose for which there is no market or general demand.
Reinstatement must be “in good faith” intended.
Examples: Schools, churches (non-commercial), water reservoirs, substations (infrastructure).
Section 62 PWA not applicable.
Acquisition of Land for a Public Work Compensation for Disturbance to Land Section 66 PWA:
Preserves common law right and introduces statutory entitlements (previously not recoverable).
Disturbance items are recoverable losses not directly based on the value of the land, arising from compulsory acquisition of land, and that are not too remote. Best described as a cost to the owner of a non-recurring nature incurred as a consequence of the work.
Authorises payment to owners and also alternatively provides the authority for the Crown or local authority to complete works.
Disturbance payments to reinstate an existing use will not be compensatable where the value of land acquired is assessed on a different (higher value) use ie disturbance can only be claimed in relation to the purpose the land was valued at.
Betterment deductions need to be considered in works of a capital nature.
Owners always have an obligation to mitigate loss.
Acquisition of Land for a Public Work Compensation for Disturbance to Land
The statement of right to claim disturbance is easy; the difficulty is proof of direct or economic loss resulting directly or indirectly from the taking.
Loss of potential profit - loss of potential in the land is intrinsic in the land’s value.
Let us not confuse disturbance with nuisance whilst the dividing line can be exceedingly fine there needs to be separation between losses actually incurred to the land and discomfort to the owner.
Reasonable cost will be paid - what is reasonable?
Acquisition of Land for a Public Work Compensation for Business Loss Section 68 PWA:
This Section contemplates business loss under two possibilities only: -
Compensation is to be paid for any business loss as a result of the relocation of a business made necessary by the acquisition or taking.
Compensation is to be paid for the loss of goodwill of a business (ie a business is closed down).
A business may also suffer temporary loss in turnover during construction. This will give rise to a disturbance payment under Section 66.
Acquisition of Land for a Public Work Willing Seller
Entitlements to payments under Sections 66 and 68 of the PWA are limited to owners who are not willing sellers, or who are willing sellers only as a result of the land having been notified.
Standard Instructions to Valuers
Date of valuation - specified date of compensation.
Purpose of the work and affect on the property.
Interest to be acquired - freehold/leasehold, cross lease and unit titles, easements etc.
Entitlement to compensation - Section 60, 61.
Basis of assessment - Section 62.
The Process of Compensation Valuation
Valuation criteria: -
“The amount which the land if sold on the open market by a willing seller to a willing buyer on the specified date might be expected to realise”.
Willing buyer/willing seller.
Specified date and sales evidence.
Highest and best use.
Before and after principle.
Effects of the RMA Designation Process
Mitigation under the RMA process can materially affect the compensation assessment under the provisions of the PWA. Impact will depend on timing of the Notice of Requirement and designation confirmation.
Compensation assessment should properly recognise and reflect benefits of mitigation works. Seek out information on mitigation requirements of the conditions applied to the designation.
Section 71 PWA - Claimants acts making execution of public work more costly. Increase in cost of work after “relevant date” may be deducted from compensation.
Compensation for Loss of Potential
Has to be real - potentialities are an intrinsic part of the market value - consist of all the advantages that the land possesses.
Cannot be too remote, expectation is not enough.
Has to be measurable and affordable.
Hypothetical subdivisions are the biggest area of contention.
Subdivision/requirements of the RMA where the Requiring Authority can restrict development where it adds cost to the works.
The Compensation Resolution Process
Meeting of valuers, mandate is normally given to the valuers to meet and explore the areas of difference and where they can compromise - this is not a revaluation but a sharing of information that may allow a compromise position to be reached.
Arbitration is a generally accepted process in the industry however the PWA provides for resolution via the LVT so there is resistance to utilise arbitration.
LVT the last bastion.
Acquiring Authority or Requiring Authority?
“Acquiring Authority” not a statutory definition - general term covering public authorities that may use PWA to acquire land for public works (Crown, government departments, Crown entities, local authorities).
Requiring Authority can also include:
A network utility operator that has made application under the terms of the RMA for “requiring authority” status.
This can be a general status or project specific.
A Requiring Authority as defined under the RMA may access the compulsory acquisition process of the PWA via Section 186 of the RMA. -
Application is made to the Minister of Lands seeking authority to seek the Crown’s intervention to undertake compulsory acquisition under the PWA.
The Public Works Act 1981 Compensation Payable where no Land is Taken
Section 63 PWA
Reinforces in the PWA limits on compensation where no land is taken.
No injurious affection is payable where the cause is change in traffic flows resulting from a new road or improvements to an existing road.
Section 181 Local Government Act 2002 - Drainage and Water Supply Works.
Useful Compensation Reference Material/Websites
www.legislation.govt.nz View up to date versions of Statutes - eg PWA, RMA, Local Government.
LINZ booklet “Landowner’s rights when the Crown requires your land for a Public Work” - download from www.linz.govt.nz
LINZ Guidelines to the Standard for the Acquisition of Land under the Public Works Act 1981. www.linz.govt.nz/standards-guidelines/crown-propertystandards/index.aspx
Textbook: “Land Compensation” by Squire Speedy, published by NZIV1985.
Textbook: “The Compulsory Acquisition of Land in New Zealand” by Peter Salmon, published by Butterworths 1982.