The Public Works Act provides for the payment of compensation for losses arising from the acquisition of land by the Crown.
Entitlement to compensation is set out in Part V of the Act. Section 60(1) provides that affected landowners are entitled to "full compensation" so that they are left in a no better or worse position, than they were before the public work commenced. This means that landowners will not be deprived of their land without fair compensation, but will not be compensated so as to make a profit from the public work.
Only persons who have an interest in the land are entitled to compensation. Owners of interests that are less than freehold (eg a lessee's interest) are also entitled to compensation if their interests are acquired. An interest in chattels or personal rights does not give a right to compensation.
Basic entitlements to compensation
Compensation is not limited to the value of the land acquired or taken. In addition to the value of the land taken, the Public Works Act entitles you to be fairly compensated for losses that may include:
- permanent depreciation in the value of any retained land (which the Act calls "injurious affection");
- damage to any land;
- disturbance resulting from the acquisition.
Further information on these types of loss is set out later in this section of the booklet.
Obligation to minimise losses
The courts have ruled that there is an obligation on landowners to take all reasonable steps to ensure that their losses are kept to a minimum. It is important you keep a record of all communications and detailed records of all expenses incurred and losses sustained, as you may be able to recover these as part of your claim for compensation. You may only receive compensation for expenses and losses that occur as a direct consequence of the acquisition of your land.
You are under a duty to mitigate your loss. This means you should take steps to minimise your losses. If losses are increased as a result of your actions (or lack of them) you will not receive compensation for these increased losses.
An acquiring authority that acquires your land will try where possible to extend every opportunity for the landowner to take any action necessary to minimise potential losses including actions such as delaying taking possession.
General provisions for compensation
The assessment of compensation is governed by section 62 of the Public Works Act. Briefly the provisions are:
The value of land is based upon the amount the land would be expected to sell for if sold on the open market by a willing seller to a willing buyer on a specified date. There are some exceptions to this, which are set out in section 62(1)(b) of the Act. The test of value is the price that your land would fetch on the "open market". This is distinct from the personal value to you as the landowner, or value to an acquiring authority that wants to purchase your land. The intention of the legislation is that a person whose land is taken or acquired is placed in the position of receiving an amount that is neither more nor less than would have been obtained if the landowner had sold to a private person in an open market sale.
No increase in compensation will be paid due to the fact that land is to be taken for a public work.
If any physical damage to land caused by or in connection with a public work interferes with the landowner's rights, compensation may be payable for the damage or reinstatement.
Change in value before the specified date of acquisition
Where, before the specified date of acquisition, the value of the land required from you increases or decreases as a result of the proposed work, any effect on the land value is to be disregarded. The "specified date" can be the date on which the land was vested in the Crown or the date on which the land was first entered upon for the public work.
The intention of this principle is that you should not suffer loss from the adverse effect of the public work (if it lowers the value of your land that is required) nor profit from the beneficial effect of the public work (if it increases the value of your land).
Special suitability or adaptability
The key factor in the application of "special suitability" is the term "no market". If there is a reasonable possibility of a market, apart from the particular work of an acquiring authority, then that potential will be taken into account in valuing the land. The special suitability or adaptability of your land for any purpose is not to be taken into account if:
- The specialist purpose could only result from the use of statutory powers; or
- There is no market other than for the needs of an acquiring authority.
Increase in value resulting from the public work
Where the public work being undertaken increases the value of land you retain, or the value of any other land in which you have an interest, this increase in value may be deducted from the total amount of compensation that would otherwise be paid to you. This is known as "betterment". Betterment applies whether the increase in value occurs before the specified date or is likely to occur after the public work commences.
This means that in assessing your compensation any betterment will be deducted from any increase in value of your retained land caused by the public work. Increase in value because of improved access New Zealand Transport Agency as a requiring authority, sometimes exercises power under section 91 of the Government Roading Powers Act 1989 to create crossing places to give access to "Limited Access Roads". Where this increases the value of your retained land, this increase in value will normally be deducted from any compensation to be paid to you.
Acquisition of part only
If there is an adverse effect on the land you retain you may be entitled to additional compensation. The compensation for depreciation in value of the retained land is called "injurious affection".
Compensation for injurious affection is provided by section 64 of the Public Works Act. Where only part of your land is taken or acquired the compensation is assessed by adopting a "before and after" approach.
This means agreeing to the value of the whole property disregarding any proposed work prior to acquisition, and comparing this with the value of the land you are left with after the taking or acquisition.
Advance payment of compensation
An advance on compensation will be paid if:
- Only part of your land is acquired; and
- It is not possible to adequately assess full and final compensation prior to carrying out the public work.
Compensation when no land is taken
A right to compensation under the Public Works Act may also arise in certain circumstances when no land is taken. Section 63 of the Act provides for compensation for substantial injurious affection to your land caused by the construction of the public work.
In addition to being compensated for the value of land taken or acquired you may be entitled to reimbursement for "disturbance". This is payment for actual monetary loss or costs incurred of a temporary non-recurring nature. Compensation for disturbance is covered in section 66 of the Public Works Act. Any compensation under this section must be as a direct result of your land being taken or acquired by the Crown, the cost of which you could not have avoided by taking reasonable precautions. Disturbance payments are not a 'general amount' to cover possible unspecified contingencies such as 'inconvenience'.
In order to qualify for disturbance payments:
- Disturbance must be the direct result of you being required to give up possession of your land to the Crown;
- Costs must be reasonable and proven that they would not have occurred were it not for the Crown's purchase of your land, or your business.
Valuation, legal and other professional costs
If you obtain professional advice, you are entitled to reasonable costs (valuation, legal and other professional costs) incurred as a result of negotiating compensation for your land.
If you intend to seek professional advice, you should first discuss this with the accredited supplier who will outline the criteria for approving professional costs. This discussion will avoid any misunderstanding about what costs you are entitled to and who will pay.
If you engage a registered valuer you must instruct the valuer that the valuation is required for compensation purposes under the Public Works Act 1981. You should make the valuation report available to the accredited supplier, if requested, to facilitate discussions.
Any costs incurred for professional advice for the purposes of negotiating compensation for your land must be reasonable.
You are not able to claim the cost of your personal time spent in negotiations.
If your land is taken or acquired, you are entitled to the reasonable costs incurred in transporting your movable property to other land. This is subject to the other land being within the same general locality, or a greater distance if that is necessary to reach the nearest land that could have been reasonably acquired in substitution for your land.
Any claim is subject to the following:
- If you intend to claim for removal costs you should discuss this with the accredited supplier before engaging a removal contractor;
- You must be able to justify that the transportation costs are reasonable.
Allowances for special improvements
Where your land is taken or acquired, there is no obligation on an acquiring authority to take over removable improvements or to pay for these items. Removable improvements are not normally part of the land acquired. However, if the improvements are not readily removable and are of use to a disabled owner or a disabled member of an owner's family, and are not reflected in the value of the land, this loss can be recovered through compensation.
Loss on mortgage repayment
Where a loss occurs in having to transfer a mortgage as a direct result of land being taken or acquired, you as the borrower are entitled to compensation for the loss where you have to take a mortgage at a higher rate which will be more expensive than the existing mortgage over your land.
If you have a business located on your land, you may claim compensation for business loss resulting from the relocation of the business. The loss may include loss of profits and goodwill. However, the loss of profits must relate to proven loss of "actual profits". Loss of "anticipated profits" is not provided for in the Public Works Act.
During the period of changeover from business premises that have been acquired for a public work, to alternative business premises, you may be forced to close down your business for the time being, resulting in your business not earning during that period. You may claim the net loss suffered, under the heading of "business loss". The main point to note is that it is the net loss of profit that is compensatable, not the loss of revenue.
If you intend to claim for "loss of profits" or goodwill you should ask your accountant to assist with preparation of your claim. It is important to support such claims with verifiable proof of loss by reference to the last three years' annual accounts of your business.
Solatium payment for homeowners
If the land to be acquired contains your home that you live in, and the Crown takes the initiative to purchase it and requires you to give vacant possession, you are entitled to be paid a "solatium" of $2000.
Payment of the solatium is conditional on the ownership of the land not having changed since it was made subject to a requirement or designated for a public work.
Assistance to purchase
Part V of the Public Works Act also provides for other types of reasonable assistance in addition to compensation payable under the Act.
If you wish to seek assistance under Part V of the Act, or if you believe you are entitled to any additional compensation, you should discuss this with the accredited supplier.