Acquisition process

Planning the process

  1. 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).
  2. 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.
  3. Acquisitions may occur by agreement or by compulsory process. A flow-chart of these acquisition processes is included at Appendix A.
i. Acquisition by agreement – Requires the agreement of the landholder and the acquisition takes place by the parties entering into a contract for the acquisition with both parties reaching mutual agreement on an appropriate price for the acquisition. The Commonwealth authority that is acquiring the interest in land manages the process. For circumstances where the acquisition cannot be authorised by the entity under the LAA delegations (for example, not available in the market within the meaning of s40(5) of the LAA), entities are required to engage Finance.
ii. Compulsory acquisition – Does not require the agreement of the landholder for the acquisition to take place, but the landholder has an entitlement to compensation on just terms (derived from section 51 (xxxi) of the Constitution). The acquisition occurs by the Finance Minister using powers under the LAA, based on the advice of the acquiring authority. The acquiring authority manages the acquisition process (including planning and executing the acquisition strategy, engagement with landholders, etc) in consultation with Finance. Finance manages the compensation process in consultation with the acquiring authority (unless compensation has been agreed up-front between the acquiring authority and landholder in consultation with Finance - see paragraph 58 below).
  1. 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. The planning phase of an acquisition should consider the reason for the acquisition, and that it is being undertaken for a public purpose which meets the requirements of the LAA.
  2. An entity may wish to examine or inspect land during the planning phase to assess its suitability for the relevant public purpose. The LAA provides for temporary entry on and examination of land for the purpose of ascertaining whether the land is suitable for a public purpose. This power can only be exercised by persons who have been authorised by the Finance Minister. Entities should contact Finance if these powers of inspection will be necessary.
  3. Prior to commencing an acquisition, delegated officials should be clearly informed of the acquisition strategy addressing the matters described in paragraphs 35 to 41 below.
  4. Consistent with the general duties detailed in Part 2-2 Division 3 of the PGPA Act (and the APS Code of Conduct), when acquiring or disposing of an interest in land officials must:
    1. advise delegated officials when there is a planned deviation from the acquisition strategy and arrange for the appropriate approvals before proceeding;
    2. inform decision makers of any changes in the cost, risk or proposed scope of the acquisition; and
    3. maintain, and appropriately file, accurate written records of the acquisition and negotiation process, including decisions made (see also section titled Obligations when interacting with external parties on Lands Acquisition Framework Overview).

Acquisition strategy

  1. While there is no statutory requirement under the LAA for an acquisition strategy to be developed, it is good practice. An acquisition strategy should set out the business case for the entity to undertake a planned acquisition, and inform an entity’s decision-makers on key considerations under relevant frameworks, as well as providing a clear understanding of the acquisition pathway. The strategy should also provide a comprehensive and balanced analysis on the benefits, costs and risks of the proposal to spend public money.
  2. 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.
  3. When developing an acquisition strategy, entities should ensure they consider whether the proposed transaction meets the policy and procedural requirements of the LAA, the CPMF, the CPRs, the PGPA Act and any other relevant policy and legislation. Entities are encouraged to obtain legal and other specialist advice where required to inform the strategy and support the transaction.
  4. 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, constitutional, legal, environmental, heritage, native title or contamination considerations.
  5. 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, and consider how the entity will engage with the landholders and how any potential conflicts of interests will be dealt with. 
  6. The level of detail contained in the strategy will vary depending on the nature and complexity of an acquisition.
  7. In general terms, an acquisition strategy should include at a minimum:
    1. details of the site;
    2. the public purpose for which the interest in land will be acquired and the proposed use;
    3. the timeframe for acquisition, including key acquisition activities to be undertaken;
    4. 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);
    5. how the acquisition has been/will be authorised (e.g. by Cabinet/responsible Minister, official within the acquiring entity);
    6. an assessment of risks;
    7. how the acquisition will be funded;
    8. 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
    9. a comprehensive and balanced written analysis on the benefits, costs and risks of the proposal.

 

Acquisition by agreement

  1. 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 attempt to acquire an interest in land by agreement before pursuing a compulsory acquisition.
  2. 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:

evaluation methods

  1. Under section 40(5) of the LAA, an interest will be taken to be available in the market if one of the following applies:
    1. the interest in land is advertised as being available for sale or lease, listed with a real estate agent or offered in response to a publicly advertised request, or
    2. the acquisition is certified by the Finance Minister as being a standard commercial transaction, i.e. the Finance Minister is satisfied that the acquisition would amount to a normal commercial transaction between parties dealing with each other on equal terms. Entities should obtain advice from Finance on the information required to support consideration of such a request.
  2. A PAD is issued under section 22 of the LAA. It is usually the first step in a compulsory acquisition process and can also be the first step in an acquisition by agreement process. PADs may only be made by the Finance Minister or a Finance delegate. A PAD is subject to reconsideration and review rights for any person affected by it.
  3. A section 24 certificate avoids the requirement for the usual pre-acquisition process steps. It is used in circumstances where there is an urgent necessity for the acquisition and it would be contrary to the public interest to delay acquisition, or where a PAD in respect of the proposed acquisition would result in a disclosure of information that would be prejudicial to the security, defence or international relations of Australia. Section 24 certificates are rarely given, and may only be given by the Finance Minister.
  4. For circumstances where an acquisition by agreement is proceeding after a PAD has become absolute or the Finance Minister has given a section 24 certificate, the acquiring authority should ensure, where circumstances allow, that the landholder is provided full information on the process before negotiations commence and the landholder is supported by the acquiring authority utilising best practice to reach mutual agreement on the terms and price. At a minimum, this information should cover:

evaluation methods

  1. Entities must assure themselves that acquisitions by agreement represent value for money under section 4 of the CPRs. In particular, officials must consider both relevant financial and non-financial costs and benefits of the acquisition when determining whether it represents value for money (see section 4 of the CPRs).
  2. 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:
    1. achieves value for money;
    2. uses public resources in an efficient, effective, economical and ethical manner; and
    3. is consistent with principles of transparency, accountability, ethics and probity.
  3. 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.
  4. 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 in order to ensure the price is on just terms and is an efficient, effective, economical and ethical use of public resources.
  5. 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 (ADR) 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).
  6. Once an acquisition by agreement is complete, entities must report to Finance within 14 days on any LAA powers that have been exercised under delegation, report as required to the Parliament under the LAA and/or on AusTender under the CPRs, and update the Australian Government Property Register (AGPR) (see Reporting).

Compulsory acquisition

  1. Compulsory acquisitions occur by the Finance Minister using powers under the LAA, and do not need the agreement of the landholder for the acquisition to take place. The landholder has an entitlement to an amount of compensation which will, having regard to all relevant matters, justly compensate them for the acquisition (see Compensation and other payments).
  2. 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.
  3. 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.
  4. Acquiring authorities should seek to manage compulsory acquisitions in a way that provides landholders with support, assistance and continuity throughout the acquisition process.
  5. There are two possible pathways to resolve compensation in a compulsory acquisition:

i. Compensation can be agreed with the affected landholder before the acquisition takes place. This negotiation and agreement is managed by the acquiring authority (in consultation with Finance), and is documented in an agreement made under section 78 of the LAA. This agreement is signed for the Commonwealth by the Finance Minister or a Finance delegate.

ii. Compensation can be claimed and/or determined after the acquisition takes place. This process is managed by Finance (in consultation with the acquiring authority). The acquiring authority is responsible for payment of compensation in all cases.

  1. Entities should consider which compensation process is appropriate for the acquisition and address the intended approach in their acquisition strategy.
  2. Once the acquisition has occurred entities must update the AGPR with the relevant details of the acquisition (see Reporting).
 
  1. For compulsory acquisition processes where compensation is determined after the acquisition, the process usually starts with the Commonwealth receiving a claim on a section 67 claim form from the affected landholder after the acquisition has taken place, advising of the amount they consider they are entitled to. See section on the heads of compensation on Compensation and other payments for the types of compensation that may be payable in a compulsory acquisition.
  2. The Finance Minister (or delegate) considers the section 67 claim form and supporting evidence, including consideration of whether the claim form is compliant. If the Finance Minister (or delegate) is satisfied that the interest in land specified in the claim was acquired by compulsory process from the claimant, the Finance Minister will accept the claim and make an offer of compensation to which the Finance Minister considers the claimant is entitled. If the Finance Minister does not consider the interest in land specified in the claim was acquired by compulsory process from the claimant, the Finance Minister must reject the claim.
  3. In order to be able to make an offer of compensation to which the Finance Minister considers the claimant is entitled, the Finance Minister needs all relevant information. At a minimum, an offer should be informed by an independent valuation and in some circumstances more than one valuation from specific experts will be required.
  4. The Finance Minister can initiate an offer of compensation on behalf of the Commonwealth under section 74A of the LAA where at least 12 months have passed since the acquisition took effect and no claim for compensation has been made by the landholder. Acquiring authorities in this situation must contact Finance, who will commence this process. The Commonwealth’s offer must represent the Commonwealth’s assessment of the compensation payable for the compulsory acquisition based on the information in its possession. Again, the Finance Minister needs access to all relevant information, including appropriate independent valuations.
  5. When the Finance Minister makes an offer of compensation, the Commonwealth must make an advance payment of the offered compensation amount. While the LAA states that the Commonwealth must pay no less than 90 per cent of the offered compensation, the Commonwealth can pay 100 per cent of the offer amount and is encouraged to do so. The acquiring authority is responsible for making the payment.
  6. If the claimant rejects the Finance Minister’s offer, the Finance Minister must reconsider the question of the amount the claimant is entitled to (having regard to the information provided by the claimant) and provide a final offer within two months of receiving the rejection notice and updated claim.
  7. If the claimant accepts the offer, the acquiring authority must promptly make the payment to the claimant. In the event the claimant doesn’t accept the final offer, there are a number of options available (see section titled Avenues for compensation resolution).
  8. See Compensation and other payments for details on heads of compensation and taxation implications. See also, paragraphs 26 and 27 of Lands Acquisition Framework Overview for details on obligations when interacting with external parties.
  1. 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. Mediation in the context of a claim for compensation under the LAA following compulsory acquisition may occur either before or after an offer of compensation has been made by the Finance Minister.
  2. 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.
  3. 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.
  4. 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 Administrative Appeals Tribunal (AAT).
    1. In reviewing the decision, the AAT may exercise all the powers and discretions conferred by the LAA on the Finance Minister in making the final offer, and can make a decision either affirming the final offer of compensation or varying the final offer of compensation made by the Finance Minister.
  1. Section 82 of the LAA provides for determination of the amount of compensation by the Federal Court of Australia (Federal Court), where a person has made a claim for compensation, or the Finance Minister has made an offer of compensation under section 74A of the LAA:
    1. 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.
  1. 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.

 

Overseas Land

  1. 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 on Reporting (see the section titled Reporting in Parliament – Overseas Acquisitions). Examples of interests in overseas land include Australian embassies and residences for posted staff.
  2. 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 on Lands Acquisition Framework Overview).
  3. 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.
  4. Entities that deal with interests in overseas land are required to report their transactions to Finance (laa@finance.gov.au). Reports on these transactions are tabled by the Finance Minister in both Houses of Parliament on a monthly basis when Parliament is sitting.

 

Leasing Transactions

 

  1. 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.
  2. Compliance with both the LAA and CPMF is required before a binding agreement comes into existence. 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.
  3. Entities should consult early with Finance if the transaction will require non-routine advice on the interpretation of the LAA, or an approval by the Finance Minister (or Finance delegate). For example, a disposal by grant of a lease with a term in excess of 22 years requires the approval of the Finance Minister or a delegate within Finance. To consult with Finance on these matters, please email laa@finance.gov.au.
  4. 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.
  5. Further, 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 required to be submitted through the notification or endorsement process in accordance with the CPMF.
    1. For further information on the lease endorsement and notification process, please email propertyframework@finance.gov.au.
  6. To ensure compliance with the Finance Minister’s direction in the LAA delegations that entities report on their exercise of powers under delegation, entities must report any leasing arrangements to Finance. Entities must use either the LAA Form Lease (L) or Report on Exercise of Powers Under Lands Acquisition Delegations 2020 Spreadsheet within 14 days of the lease arrangement being entered into.
    1. For access to the LAA Form L or assistance completing the Report on Exercise of Powers Spreadsheet, please contact laa@finance.gov.au. 
  7. The start and end of a lease for office accommodation must be reported to Finance for updating the AGPR (see Reporting).

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