What is a Public Acquisition Overlay?
Compulsory Acquisition: 22 October 2024
Author: Sean Richards - Our People
A Public Acquisition Overlay ( “PAO”) is used by a planning Authority to reserve land for a future public use, meaning the land subject to the overlay can be compulsory acquired at any time under the Land Acquisition and Compensation Act 1986 (Vic).
You may own a property that you are looking to sell or you may be looking at purchasing a property that is affected by a Public Acquisition Overlay. In these situations, it is important to know how the PAO may affect the proposed sale or purchase of the land.
Selling with a Public Acquisition Overlay
When selling a property affected by a Public Acquisition Overlay you may find that people are not willing to purchase at the expected market value of the property because of the threat of an impending acquisition of the land, but you may find a willing purchaser at a lower sale price. When this occurs, you may be entitled to make a claim against the planning Authority for the ‘loss on sale’ caused by the PAO under the Planning and Environment Act 1987 (Vic).
For an example, the market value of your property (absent the PAO) might be $500,000, however you have sold the property for $450,000. In this situation, you would be seeking to claim the loss on sale caused by the reservation of the PAO, being $50,000.
To be able to do this, it is important that you meet a number of requirements including:
- You must have been the owner at the time the PAO was placed on the property;
- You must provide the relevant planning Authority with 60 days written notice of your intention to sell the property; and
- The sale must be conducted as an ‘arms-length’ transaction.
To make this claim, you must also show that you have suffered a loss because of the PAO, which can be achieved by engaging an independent valuer to assess the market value of the land with and without the PAO to determine whether a loss has been suffered.
If you are entitled to compensation for a loss on sale claim under the Planning and Environment Act, then you are also able to claim professional expenses incurred in formulating your claim, including both legal and valuation expenses, however if you are not entitled to compensation, then you are not entitled to recover these professional expenses.
To ensure you are entitled to make a claim and receive compensation, we recommend seeking legal advice as early in the process as possible (i.e. the moment that you intend to sell your property affected by a PAO).
Purchasing with a Public Acquisition Overlay
When looking to purchase a property with a PAO, the most important thing you should be aware of is that there may be a strong chance that your property will be acquired by the planning Authority in the future.
If you follow through with the purchase, and the land is acquired while you are the owner, then you may be entitled to claim compensation for the market value of your land (at the date of acquisition) pursuant to the Land Acquisition and Compensation Act. However, if the previous vendor received compensation for a loss on the sale, your compensation will be reduced by an amount prescribed under the Land Acquisition and Compensation Act.
Considering the above, we recommend seeking preliminary legal advice as early as possible in the process, so that you are aware of the impact of a Public Acquisition Overlay and how this may impact your entitlements to compensation.
If you require advice regarding a PAO over your property or an impending acquisition of land that you own or lease, our Compulsory Acquisition Team is happy to meet with you for an obligation free initial meeting to discuss your circumstances and your potential entitlements.