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Your farm, your castle - compulsory acquisition and the Public Works Act

31 July 2017

The government is building a new motorway through the middle of Marty’s farm. The farm has been in Marty’s family for over a century. Marty doesn’t want to lose the farm. The Council wants to take some of Fran’s lifestyle block to build a water reservoir. This will spoil Fran’s tranquil outlook. An electricity supply company wants an easement to run power lines across Jason’s farm. Jason believes the lines will be unsightly and create a health hazard.

Can the government, Council and electricity supply company take Marty’s and Fran’s land and take an easement over Jason’s land? The answer is “yes”, if the land is required for a “public work”. Under the Public Works Act, the government, local authority and other Crown entities have the power to compulsorily acquire land for a public work.

Full compensation

Under the Public Works Act 1981, if your land is acquired for a public work, you will be entitled "full compensation”. “Full compensation” means compensation that will place you in no better or worse position than if your land had not been taken. You cannot profit from the taking or hold the acquiring authority to ransom. The amount you receive as compensation will be based on registered valuations of the land.

As well as being paid for the land actually taken, you will be entitled to compensation for “injurious affection” and “disturbance” costs. “Injurious affection” is compensation for any depreciation in value of the land being retained by you. For example, Jason will be entitled to compensation for the reduction in value of his land as a result of the power line easement over it. “Disturbance costs” are costs of a non-recurring nature incurred as a result of the taking, such as legal and valuation costs, mortgage break fees, fencing, water supply re-establishment, noise mitigation work and compensation for contractor’s access while the works are being constructed. You can only claim costs and losses that are a direct result of the public work. You must minimise your costs and losses and keep track of them yourself.

To establish the amount of compensation for your land being taken, both you and the acquiring authority usually obtain valuations from registered valuers. The two valuations will form the starting point for negotiation on the compensation amount.  Usually it is possible to agree on compensation, but if you can’t agree then you will have to get a determination from the Land Valuation Tribunal. If the amount is determined by the Land Valuation Tribunal, you will have to pay your legal costs of the determination, whereas if you reach agreement with the acquiring authority your legal costs will be paid.

Where the land taken includes a dwelling or was used for by the owner personally (for example, as part of a farming activity) and there is no equivalent land readily available for purchase, the acquiring authority must take reasonable steps to offer land as compensation for the land taken.

The Public Works Act was amended in 2017 to provide for additional compensation of up to $50,000 if the land acquired included the owner’s home. The $50,000 is made up of a flat payment of $35,000, a further $10,000 if an agreement is reached within six months from the start of negotiations and the agreement specifies the date that vacant possession of the land and a further $5,000, if the Minister for Land Information or the local authority considers it is warranted in the circumstances. The Act was also amended to include additional compensation of 10% of the value of the land where the land acquired does not include the owner’s home. The minimum amount payable in these circumstances is $250 and the maximum amount payable is $25,000.

Easing the pain

The acquisition process can be slow and stressful. Often the process takes longer than first imagined and no one ends up entirely happy with the outcome. One small consolation is that the acquiring authority must act reasonably and negotiate in good faith. This means that you should receive the benefit of the doubt if an aspect of the valuation is uncertain.

Given the acquiring authority pays for your legal and valuation fees, it is best to seek the right advice from the very start. This way you can be sure you’re fully and fairly compensated in each of the areas of loss you are entitled to. An experienced advisor on the Public Works Act can also help you with realistic expectations from the beginning and make the process as painless as possible.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.

 

Barbara McDermott