Planning the process
To support appropriate planning, entities should develop an acquisition strategy that is commensurate with the scale, scope and risk of the project (see Acquisition strategy below).
Entities should engage relevant experts such as probity, legal and strategic property advisers commensurate with 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.
Requires the agreement of the interest holder 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 Lands Acquisition Act 1989 (LAA) delegations (for example, where the interest is not available in the market within the meaning of section 40(5) of the LAA), entities are required to engage with Finance.
Does not require the agreement of the interest holder for the acquisition to take place. 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's Minister. 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).
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.
Prior to commencing an acquisition, delegated officials should be clearly informed of the acquisition strategy addressing the matters described in Acquisition strategy below. Consistent with the general duties detailed in Part 2-2 Division 3 of the Public Governance, Performance Accountability Act 2013 (PGPA Act) (and the APS Code of Conduct), when acquiring or disposing of an interest in land officials must:
- advise delegated officials when there is a planned deviation from the acquisition strategy and arrange for the appropriate approvals before proceeding;
- inform decision-makers of any changes in the cost, risk or proposed scope of the acquisition; and
- maintain, and appropriately file, accurate written records of the acquisition and negotiation process, including decisions made (see Obligations when interacting with external parties).
Acquisition strategy
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 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:
constitutional
legal
environmental
heritage
native title
contamination consideration
Valuation of land
Entities should obtain an independent valuation of the land (including determining the appropriate method to procure independent and credible valuation services, utilising a valuer not affiliated with either party). 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
- a comprehensive and balanced written analysis on the benefits, costs and risks of the proposal, and
- details of any broader policy considerations.
See Public parks below for more information.
Contact Finance for further information and where the acquisition may involve land in a public park (wholly or in part).
Acquisition by agreement
Acquisitions by mutual agreement are generally the Commonwealth’s preferred approach, where 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:
Under section 40(5) of the LAA, an interest will be taken to be available in the market if one of the following applies:
• 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
• the acquisition is certified by the Finance Minister (or delegate) as being a standard commercial transaction, that is, the Finance Minister (or delegate) 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 in relation to the level of delegation required. Forms are available on the Information to support the Lands Acquisition Act 1989 page.
See Guidance to assist delegates in considering whether to exercise the Minister's right to issue a certificate under section 40(6) of the LAA.
A Pre-Acquisition Declaration (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.
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 used and may only be given by the Finance Minister.
Where an acquisition by agreement proceeds 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 with full information on the process before negotiations commence. The landholder should be supported by the acquiring authority utilising best practice to reach mutual agreement on the terms and price. At a minimum, this information should cover:
- why the interest in land is required
- what the acquisition by agreement process involves
- the rights and duties of those affected
- an indicative timetable of events
- the interest is owned by the Commonwealth or a Commonwealth authority.
The LAA applies to the acquisition or disposal of an interest in land by an 'acquiring authority' as defined in the LAA.
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
- is consistent with broader policy considerations. Entities should contact Finance for further advice.
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.
Dispute resolution
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 Avenues for compensation resolution below).
See Stakeholder engagement for more information.
Compulsory acquisition
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.
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 seeking agreement to compulsorily acquire an interest in land.
Acquiring authorities should manage compulsory acquisitions in a way that provides landholders with support, assistance and continuity throughout the acquisition process.
Entities should 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:
The 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.
This process is managed by Finance (in consultation with the acquiring authority). The acquiring authority is responsible for payment of compensation in all cases.
Entities should consider which compensation process is appropriate for the acquisition and address the intended approach in their acquisition strategy.
The Process for Claims and offers of compensation - post-acquisition
Avenues for compensation resolution
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
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 Review Tribunal.
Federal Court of Australia
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.
See Stakeholder engagement for more information.
Public parks
An interest in land in a public park may only be acquired through a compulsory acquisition under the LAA.
The LAA requires that acquiring authorities must obtain the consent of the relevant state or territory government when compulsorily acquiring land in a public park. For this reason, entities should be aware that project timeframes to acquire land in a public park can be lengthy.
Where an acquisition involves land in a public park (wholly or in part), entities should consult with Finance during the planning stage. Early engagement enables Finance to advise on particular factors to consider when developing the acquisition strategy and to provide early visibility of the acquisition to the decision maker (the Finance Minister).
Prior to entering into negotiations, an acquisition of an interest in land in a public park will likely require legal advice on the definition of a public park under the LAA. If the land is deemed not to be land in a public park under the LAA, the legal advice should outline the process which must apply to the acquisition. Valuation expertise may also be required to support the acquisition.
In developing an acquisition strategy, entities should have regard to the compensation provisions under the LAA, which provide an alternative method for determining market value in circumstances where the claimant intends to purchase replacement park land.
Overseas land
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 Delegations for more information.
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.
Leasing transactions
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.
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 30 years (including extension options) requires the approval of the Finance Minister or a delegate within Finance.
To consult on these matters, please email LAA@finance.gov.au.
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 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 that 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 to which they are being submitted has the appropriate delegation under Lands Acquisition Delegation 2024 (No. 2). 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 only 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 (No. 2), delegates should ensure that the exercise of delegations is appropriately recorded and made available upon request.
[Entity name] proposes to acquire a [insert type of interest/s being acquired e.g. lease, renewal of existing lease or other kind of arrangement] from [insert other party/ies names] for the purposes of [insert the public purpose/s associated with the transaction e.g. for storage purposes].
The key terms of this transaction are outlined below and in the attached documentation [attach relevant documentation including maps, proposed lease or licence agreement and other information relevant to the delegate].
Transaction Details:
• [Insert in dot point form, details of the proposed transaction including: location, size of the interest, term length, proposed commencement date, options for extension, cost per annum and legal representation of the other party to the transaction].
Delegate Authorisation:
Section 40(1) only:
Your authorisation under section 40(1) for the acquisition of the proposed interest in land by agreement is sought.
Section 40(1) and 40(6):
This interest requires certification that it is a ‘standard commercial transaction’ under section 40(6) of the LAA as well as authorisation under section 40(1). The acquisition of the interest/s is considered to represent a ‘standard commercial transaction’ for the reasons below.
• [List reasons why the proposed interest/s would be considered a ‘standard commercial transaction’ – refer to the Guidance Finance has published on s.40(6) certification for further guidance]
For the reasons above, your certification under section 40(6) and authorisation under section 40(1) of the LAA is sought.
Delegate Response
Section 40(1) only:
Based on the information provided and noting I currently occupy the position of [insert position] within the [insert entity name], which is listed in Schedule 2 of the Lands Acquisition Delegation 2024, I authorise the acquisition of the interest/s in land under section 40(1) of the LAA.
Section 40(1) and 40(6):
I currently occupy the position of [insert position] within the [insert entity name], which is listed in Schedule 2 of the Lands Acquisition Delegation 2024, I certify that the proposed acquisition of the interest/s in land are a ‘standard commercial transaction’ under section 40(6) of the LAA and authorise the acquisition of the interest/s in land under section 40(1) of the LAA.
If you have questions, please contact us at LAA@finance.gov.au.
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