Land compensation law in relation to subsequent owners


In Western Australia, a right to claim compensation does not automatically arise upon the reservation of land under a planning scheme.  Compensation for the reservation of land cannot be claimed until one of the following occurs:

1 the land is first sold following the date of reservation;

2 the responsible authority refuses an application made under the planning scheme for development approval; or

3 the responsible authority grants approval of development on the land subject to conditions that are unacceptable to the applicant.

A claim for compensation has to be made within six months of one of these trigger events.  Under trigger 1, it is the owner at the time of reservation who may claim compensation.  Under trigger 2 or 3, it is the owner of the land at the time of making the development application concerned.

An issue that arose for consideration by the High Court in Temwood was whether a subsequent purchaser of land after the reservation has occurred may validly claim compensation after trigger 2 or trigger 3 have occurred (and where compensation has not been previously paid).  The High Court was divided on the issue, and no definitive judicial decision has since been made on the issue.

Two judges of High Court in Temwood held that such a claim could be validly made while two other judges took the opposite view; the remaining judge made no conclusion on that issue.  There was no majority decision in that Court and in any event the issue was obiter dicta and not integral to the main issue determined in that appeal.  Accordingly, Temwood is not a decisive authority on that issue.

The Western Australian Planning Commission (WAPC) has since Temwood taken the position that subsequent purchasers cannot validly claim injurious affection for reserved land.  The WAPC has rejected a number of claims on this basis and some claimants have commenced proceedings in the Supreme Court seeking to challenge the WAPC’s position.  Those proceedings are yet to be determined by the Court.

Where a compulsory taking order is registered on a title, the owner and the holders of other interests have the right to claim compensation under Part 10 of the Land Administration Act 1997 (WA).  On the other hand, the reservation of land under a planning scheme for a public purpose, whilst not formally taking the land affected often imposes an effective sterilisation of that land for any purpose other than the purpose for which it is reserved.  For example, the reservation of land for Regional Open Space for purposes of conservation usually constrain that land from any form of development for private purposes and some have argued that reservation amounts to a de facto acquisition of such land.

Notwithstanding the impacts of reservation, the provisions for the so called right to compensation for injurious affection through the making of planning schemes (eg reserving land for public purposes) are subject to qualifications and requirements in addition to the trigger events described above.  It is only the owner who can make the claim (not holders of lesser interests eg leases) and the claim is limited to the area of land reserved (the impacts on adjoining land are excluded).  It is also evident that the right may be lost in some circumstances, most typically where a planning authority seeks to impose requirements for affected land to be given up free of cost through conditions and in requirements of planning approval processes such as conditions of subdivision approval requirements imposed through structure planning process, rezoning applications and the like. 

Although the Temwood decision threw considerable uncertainty on whether compensation rights accrued to subsequent purchasers, the subsequent introduction of the Planning and Development Act 2005 (WA) (PD Act) did not clarify the position.  In 2008, the Law Reform Commission (LRC) made a number of recommendations including that the PD Act be amended to provide that entitlement to compensation may be formally assigned by the original owner to a purchaser of reserved land and to allow a discretion to the Minister to extend the time limit for making a compensation claim beyond six months.

According to the LRC recommendation, entitlement to compensation would expire:

(1) for the original owner:

(a)    six months after a development application is refused or approved with unacceptable conditions but only in respect of the particular development application refusal or conditional approval (i.e. not in respect of a subsequent development application made by the same owners in good faith); or

(b) six months after first sale, if not assigned to the purchaser;

(2) for a purchaser of reserved land:

(a) six months after a development application is refused or approved with unacceptable conditions provided that the original owner has, at the time of selling the land, assigned to the purchaser, in approved form, his entitlement to compensation upon an unsuccessful development application;

(3) and in any case:

(a) subject to a discretion of the Minister to extend the time limit.

The State Government has recently announced its recommendations through the Department of Planning’s (Department) publication of the Review of the Planning and Development Act 2005 (September, 2013) (Review) which proposes a departure from the LRC recommendation.

Notwithstanding the LRC recommendations, the Department and WAPC maintain that it is only the original owner at the time of reservation who is entitled to compensation and the right does not pass to subsequent owners, and proposes that the legislation make clear that that is the case.  The WAPC argues that a purchaser is likely to have purchased the land from the original owner at a reduced (affected) price, so has not suffered any loss due to the presence of the reservation over the land when purchasing the land.

The WAPC also expressed concerns about the right to claim compensation continuing indefinitely if the LRC’s approach was adopted, instead of the parties being required to deal with the injurious affection at the time that reservation arises.  Further, the WAPC is concerned about being required to provide compensation many years after the event that created the injurious affection.

Accordingly, the Review proposes to amend the relevant provision of the PD Act (section 178 (1)) to limit the right to claim compensation only to the owner at the time of the reservation and it is only that owner who will have the right to claim compensation for injurious affection for a regional reservation where:

1 the land is first sold at a reduced value following the reservation; or

2 an application to develop the land is refused or granted subject to unacceptable conditions.

The Department is currently assessing the submissions made on these and other recommendations in the Review, and it is anticipated that a Position Paper will be released later this year.

Lavan Legal comment

The principles concerning compensation for injurious affection is a difficult and complex area with considerable uncertainty and risks for owners, developers and prospective purchasers of land affected by a reservation in a planning scheme.  A failure to address these issues at the earliest time could lead to a loss of a right to compensation.

The State’s planning authorities are moving to legislate to preclude claims being made by persons who were not owners at the time that the land had been reserved.  It will be appropriate for owners, developers and prospective purchasers of affected land to consider the implications and how legislative change may affect them.

If you have any queries over these issues or otherwise how a reservation affects your land please contact Brian McMurdo or Clare Gleeson in the Lavan Legal Planning and Environment Team.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.