Acquisition

To support appropriate planning, entities should develop an acquisition strategy that is commensurate to the scale, scope and risk of the project (see section titled Acquisition strategy below).

Entities should engage relevant experts such as probity, legal and strategic property advisers commensurate to the complexity, sensitivity and value of the project, and take into consideration any commercial sensitivities and confidentiality requirements.

Acquisitions may occur by agreement or by compulsory process. Acquisition process maps are included in the right-hand menu under Tools and templates.
 

Definition of public purpose

Interests in land can only be acquired for a public purpose, which is defined in the LAA as being a purpose in respect of which the Federal Parliament has the power to make laws and includes, in relation to land in a Territory, any purpose in relation to the Territory.

While there is no statutory requirement under the LAA for an acquisition strategy to be developed, it is good practice. An acquisition strategy will be expected by Finance for any proposed compulsory acquisition.

Material variations to, or departures from, an approved acquisition strategy should be supported by appropriate records and be approved by an appropriate decision-maker within an entity.

When developing an acquisition strategy, entities should ensure they consider whether the proposed transaction meets the policy and procedural requirements.

Other activities to consider to inform decision making

Entities are encouraged to obtain legal and other specialist advice where required to inform the strategy and support the transaction. Entities should note that there are additional due diligence activities that should be considered as part of the acquisition strategy. These activities could include, but are not limited to:
 

Valuation of land

Entities should obtain an independent valuation of the land (including determining the appropriate method to procure independent and credible valuation services). In procuring valuation services, entities are required to ensure that the transaction will deliver value for money, consider how the entity will engage with the landholders and how any potential conflicts of interests will be dealt with.

The level of detail contained in the strategy will vary depending on the nature and complexity of an acquisition.

In general terms, an acquisition strategy at a minimum should include:

• details of the site
• the public purpose for which the interest in land will be acquired and the proposed use
• the timeframe for acquisition, including key acquisition activities to be undertaken
• any known interests in the land and how the entity proposes to engage with the interest holders and acquire relevant interests (with reference to the acquisition options and requirements of the LAA)
• how the acquisition has been/will be authorised (for example, by Cabinet/responsible Minister, official within the acquiring entity)
• an assessment of risks
• how the acquisition will be funded
• whether the acquisition would deliver value for money and whether it would meet the PGPA Act requirements to use public resources in an efficient, effective, economical and ethical manner, and
• a comprehensive and balanced written analysis on the benefits, costs and risks of the proposal.

Acquisitions by mutual agreement are generally the Commonwealth’s preferred approach, where it is clear that they represent value for money for the Commonwealth. Where appropriate, acquiring authorities are encouraged to acquire an interest in land by agreement before pursuing a compulsory acquisition.

Under the LAA, the transaction must be for a public purpose and one of four conditions must be met in order to authorise an acquisition by agreement:

Value for money

The LAA does not specify how the terms and price should be determined for an acquisition by agreement. When agreeing the terms and price with a landholder, entities must ensure that the acquisition is on just terms and:

• achieves value for money
• uses public resources in an efficient, effective, economical and ethical manner
• is consistent with principles of transparency, accountability, ethics and probity.

Market availability

When an interest in land is considered ‘available in the market’ as defined in section 40(5) of the LAA, the price agreed with the landholder for the acquisition of that interest should be the market price of the interest.

Where an interest in land is not considered ‘available in the market’ as defined in section 40(5) of the LAA, when determining the price for the acquisition of that interest, entities may consider the market price of land and other relevant factors. This should be done transparently and ethically, consistent with the PGPA, in order to ensure the price is on just terms and is an efficient, effective, economical and ethical use of public resources.

In the event the acquisition by agreement was initiated by a PAD or section 24 certificate, and agreement on terms and price of the acquisition cannot be reached, entities should consider using alternative dispute resolution techniques before moving to a compulsory acquisition process. This could include engaging a qualified independent third party to evaluate and/or mediate the process (see section titled Avenues for compensation resolution below).

Acquiring authorities are expected to obtain the support of their portfolio Minister for a proposed compulsory acquisition. The relevant portfolio Minister should write to the Finance Minister outlining the intention to compulsorily acquire an interest in land.

Acquiring authorities should seek to manage compulsory acquisitions in a way that provides landholders with support, assistance and continuity throughout the acquisition process.

Entities should seek to engage Finance as soon as practical if they are planning a compulsory acquisition. Several steps in the compulsory acquisition process may only be undertaken by the Finance Minister or a Finance delegate.

There are 2 possible pathways to resolve compensation in a compulsory acquisition:

Entities should consider which compensation process is appropriate for the acquisition and address the intended approach in their acquisition strategy.

Mediation

Mediation can be a beneficial process to assist parties to negotiate a mutually agreeable outcome. It can be more flexible, efficient and less costly than litigation.

While there is no requirement under the LAA to offer mediation when the parties do not agree on the amount of compensation, under a compulsory acquisition process the Finance Minister and a person who has rejected an offer (including a final offer of compensation) may agree to refer the question of the amount of compensation to be determined by an expert or settled by an arbitrator.

Any agreement at mediation in relation to a claim for compensation following compulsory acquisition will still need to be reflected in the decision-making processes and formal steps provided for under the LAA in terms of the making and acceptance of offers of compensation.

Administrative Review Tribunal (the Tribunal)

Section 81 of the LAA provides that if a final offer of compensation by the Finance Minister is rejected by a claimant, then the claimant can seek a review of the Finance Minister’s decision in the Tribunal.

Federal Court of Australia (Federal Court)

A claimant, or the Commonwealth may institute proceedings in the Federal Court for a determination of the amount of compensation to which the person is entitled.

The claimant or the Commonwealth cannot institute proceedings in the Federal Court seeking a determination of compensation until at least 3 months after the making of a claim or the offer of compensation under section 74A.

The acquisition (and disposal) of an interest in overseas land by entities is also subject to the LAA (see section 125) and the reporting requirements detailed below. Examples of interests in overseas land include Australian embassies and residences for posted staff.

Unless an exemption applies, written approval from the Finance Minister or an appropriate delegate within an acquiring authority or in Finance is required before an entity can authorise the acquisition or disposal of an interest in overseas land (see the section titled Delegations above).

Where an interest in overseas land is acquired by agreement, the details of the transaction must be tabled in both Houses of Parliament within 15 sitting days of the acquisition taking effect.

Leases are an interest in land under the LAA and leasing transactions involve entities exercising LAA acquisition or disposal powers, generally under delegation from the Finance Minister. The LAA obligations are additional to the requirements for lease notification or endorsement and local impact assessment outlined in the CPMF.

Binding agreements are not to be entered into until authorisation under the LAA is granted, and Finance has advised the outcome of the lease notification or endorsement process.

For other circumstances where a proposed lease is not supported by delegation to the entity under the LAA delegations (for example, the lease is not available in the market within the meaning of section 40(5) of the LAA), entities are required to engage Finance early.
 

Support available for leasing

Entities should engage with Finance and their Property Service Provider (PSP) as early as possible with respect to leasing proposals. In planning for a new lease, entities should work with their PSP to determine whether the lease proposal will be subject to the notification or endorsement process in accordance with the CPMF. 

To ensure compliance with the Finance Minister’s direction in the LAA delegations, entities must keep a register of the exercise of powers under the LAA, to be made available on request to the Finance Minister or Finance. Entities that do not have the appropriate delegations must submit an Authorisation of Property Lease or Licence form to Finance for authorisation prior to entering into the proposed arrangement. Entities holding appropriate delegations may use either the Authorisation of Property Lease or Licence form or incorporate wording similar to the standard forms of words listed in the following section into other briefing documents or requests for approval to seek delegate authorisation. 

Separately, the start and end of a lease for office accommodation must be reported to Finance for updating the AGPR (refer to Reporting for details on the information which needs to be reported in the AGPR).

Certification of Property Lease – Standard Form of Words

INSTRUCTIONS

The standard forms of words below are suggested for use by entities when seeking approval from a Lands Acquisition Act 1989 (LAA) delegate that a proposed acquisition of a property lease amounts to a ‘standard commercial transaction’ for the purposes of section 40(6) of the LAA. 

These words could be included in a briefing, minute document, email or a standalone document. Entities are able to choose the most appropriate method for providing this information to the delegate in line with internal practices. When used via email, the delegate should include their signature block which clearly outlines their name and position within the entity.

In using these words, entities should ensure that the officer which they are being submitted to has the appropriate delegation under Lands Acquisition Delegation 2024. If no official in your entity holds the relevant delegation, entities should contact Finance. 

There are 2 kinds of processes which these standard words deal with: 

• authorisation of the acquisition of an interest in land under section 40(1), and 
• certification that a proposed transaction is a ‘standard commercial transaction’ under section 40(6). 

Where an interest is ‘available in the market’ (that is, listed publicly or offered in response to a public advertisement), a section 40(6) certification is not required and the wording for section 40(1) should be used only. Where section 40(6) certification is required, both sets of words should be used as both are required before the interest can be acquired. 

Consistent with the Minister for Finance’s directions in the Lands Acquisition Delegation 2024, delegates should ensure that the exercise of delegations is appropriately recorded and made available upon request. 

If you have questions, please contact us at LAA@finance.gov.au. 

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