Commonwealth Property Disposal Policy

Context

The CPDP applies to disposals of Commonwealth property authorised under section 119 of the Lands Acquisition Act 1989(LAA). The LAA provides the legal basis for Commonwealth entities to dispose of an interest in land. Under the LAA, the Finance Minister is able to delegate authority to certain officials within Commonwealth entities to approve property disposals. Before exercising the delegation powers of the LAA, delegates must consider the CPDP, including whether the proposed disposal requires approval from the Finance Minister. Read more about delegations and approvals.

Under the Public Governance, Performance and Accountability Act 2013, Commonwealth entities must use and manage property they hold (as a public resource) in an efficient, effective, economical and ethical manner.

This policy does not apply to the exercise of powers under section 122 of the LAA.

Audience

The CPDP applies to all non-corporate Commonwealth entities (NCEs) and those corporate Commonwealth entities (CCEs) that must comply with the LAA.¹

Key points

The CPDP should be read with the following guidance material:

• Resource Management Guide 500 – Commonwealth Property Management
• Resource Management Guide 501 – Lands Acquisition Framework
• A Guide to Commonwealth Property Disposals.

General policy

Surplus Commonwealth property must be sold on the open market at full market value, unless agreed otherwise by the Finance Minister.

Surplus property criteria

Entities should only hold property if it:

• contributes to government service delivery outcomes; or
• represents value for money.

Contribution to service delivery

To demonstrate the property contributes to government service delivery outcomes, it must meet one or more of the following criteria:

• the property directly relates to the entity’s core business
• the property serves a ‘public purpose.’
• the property is a strategic landholding for future Commonwealth use or development, such as retaining land for future infrastructure or defence purposes
• the property has a unique non-financial quality to the extent that a change of ownership would negatively affect the entity’s operations. Examples include special purpose buildings or land for environmental offsets.

Value for money

To demonstrate value for money, the entity should be able to show that retaining the property provides a greater benefit for the Commonwealth than disposing of it. This must meet one or more of the following criteria:

• retaining the property will result in a clear financial benefit – for example, retaining the property would give the Commonwealth a better financial outcome than selling it
• the property supports a function that could not be delivered elsewhere at lower cost without negatively affecting service delivery outcomes
• the land has low market value, limited alternative uses and/or high disposal costs, meaning disposal is unlikely to provide a net benefit to the Commonwealth  
• retaining the property protects broader Commonwealth value, such as environmental, heritage or strategic value that would be diminished through divestment.

Property Disposal Clearing House

When an NCE has assessed a property as surplus to requirements, the NCE must notify other Commonwealth entities of surplus property suitable for disposal through the Property Disposal Clearing House to test whether there is another Commonwealth use for the property.

The Clearing House does not apply when:

• properties have no marketable value (e.g. minor parcels of land resulting from subdivision of land or post-road infrastructure upgrades)
• contractual terms are in place that contain previous owner rights

Disposal of Commonwealth property

Surplus property should be progressed for disposal at the earliest opportunity. NCEs are expected to review their property portfolio regularly to determine potentially surplus property.

In most instances, sale of property to a private individual or organisation can only occur through a sale on the open market. Circumstances where an off-market sale to a private individual or organisation is allowed are very limited. For further information see off market sales.

Alternative use proposals

Alternative use proposals only apply to property managed by NCEs.

When an alternative use proposal is received, the NCE that manages the property must first assess whether the land or property is surplus to needs. In undertaking this assessment, the NCE will consider:

• if the property is essential for government service delivery outcomes
• the proposal’s feasibility and value for money to the Commonwealth
• the benefits to the economy, community and/or environment
• how the proposal aligns with government policy.

Anyone may propose an alternative use for Commonwealth property, including members of the public, community organisations, companies and any level of government.

Any disposal resulting from an alternative use proposal must be consistent with the requirements of the CPDP, including considering affordable housing outcomes when responding to an alternative use proposal.

Affordable housing outcomes

Entities must comply with the CPDP when disposing of land suitable for housing. The sale of land suitable for housing should include affordable housing initiatives, such as inclusionary or density zoning, where practical. Entities should work with state, territory and local governments to encourage planning and zoning measures that will deliver an appropriate amount of affordable housing on suitable land.

Entities should consider state, territory and local government planning legislation and housing strategies to ensure alignment with, and awareness of, the approaches adopted by other levels of government in addressing affordable housing.

Disposals of land suitable for housing are subject to the approval of the Finance Minister, with the exception of the open market sale of existing housing.

Off market sales

Overview

Off-market sales are those made direct to a purchaser, usually at market value, without the property having first been offered for sale on the open market.

Proposals for off-market sales, including concessional sales, require the relevant portfolio minister to seek the approval (with limited exceptions) of the Finance Minister. In the first instance, proposals should be referred to Finance for discussion (see Approval process below).

An off-market sale, negotiated at market value, may be appropriate in the following circumstances:

• Government-to-government sale: the sale is to a state, territory or local government and would:
  • protect other Commonwealth property interests; or
  • facilitate Commonwealth or cooperative policy initiatives that could not otherwise be achieved through an open market sale; or
  • optimise broader government outcomes including economic or social outcomes, such as increasing housing supply.
• Sale to CCEs: sale of a property to a CCE is in the Commonwealth’s interests.
• Former owner: where the former owner has an entitlement, as defined in section 121 of the LAA, the former owner is to be given the first right of refusal to purchase the property at full market value.
• Legal obligation: there is a legal obligation to sell to a specific individual or organisation.
• No market for the property: in limited circumstances, where the land has been assessed by an expert as having no competitive market, it may be sold to a private individual or organisation at fair market value as certified by an independent valuer.
  • Generally, a property will only be considered as having no competitive market where it is landlocked, located in a rural/remote area and/or unable to be sold on the open market due to its physical features.
• Properties under a long-term tenancy as a principal place of residence: where a residential property has been continually leased to the same individual as their principal place of residence for a long-term period, entities may dispose of the property to the tenant at market value as certified by an independent valuer.

Concessional sales

Concessional sales are off-market sales concluded at a purchase price below market value.

Concessional sales may be appropriate in some circumstances, such as to another level of government where it supports broader government outcomes. The approval section below has information on requirements.

The Finance Minister may require that concessional sale contracts include security of purpose conditions to ensure the land is used for its approved future purpose.

Standard contract clauses which impose security of purpose conditions and provide sanctions for breaching these conditions are available from Finance upon request.

Entities must consult Finance before making, or agreeing in-principle with the purchaser, any change to the terms of the security of purpose conditions.

Approval process

Commonwealth entities must seek approval from the Finance Minister prior to commencing any sale negotiations or discussions that could create commercial obligations. In some circumstances, it may be appropriate to seek in-principle approval from the Finance Minister for a proposed disposal to allow negotiations between parties to begin.

All off-market sales must be approved by the Finance Minister or their delegate within the Department of Finance. Off-market sales are subject to agreement with the relevant portfolio minister/s.

In limited circumstances, certain officials within the Department of Finance can approve an off-market sale under delegation, such as disposals under a legal obligation or for minor transport and other infrastructure.

In the first instance, any proposal for an off-market sale of Commonwealth property should be referred to Finance (via LAA@finance.gov.au) for discussion.

Land swaps

Land swaps are where an off-market sale and acquisition occur simultaneously between the Commonwealth and a state, territory or local government.

Land swaps support shared government policy objectives and may involve swapping a higher value property for a lower value property due to the strategic significance of the lower value property in Commonwealth policy outcomes.

Before commencing negotiations with the appropriate jurisdiction, land swaps must be approved by the relevant portfolio minister and the Finance Minister. In some circumstances, it may be appropriate to seek in-principle approval from the Finance Minister so negotiations can begin.

Where a land swap is being considered entities should contact Finance via LAA@finance.gov.au to discuss as soon as practicable.

More information

For more information or questions on the CPDP, read the Commonwealth property disposal guide or contact Finance via LAA@finance.gov.au.