How Is Compensation for Acquired Land Assessed?

Division 3 of Part IV of the Land Act 1996 sets out how the amount is worked out. Three heads, and one important exclusion.

Section 23(1) — the three heads

(a) Value at the date of acquisition

Everything is valued as at the date of acquisition — the date of publication of the notice in the National Gazette. Not the date of the notice to treat, not the date of the claim, not the date of payment. Later movements in the market are irrelevant to the assessment, though interest may run under Division 8.

Get a valuation prepared as at that date, by a valuer who says so expressly.

(b) Severance

Where the State takes part of your holding, the remainder may be worth less than a proportionate share — a block cut in two, a farm separated from its water, a lot left without road access. That loss is compensable as severance damage.

(c) Enhancement or depreciation of the rest

Section 23(3) makes this a two-way adjustment: where the value of the claimant’s interest in other land adjoining the acquired land is enhanced or depreciated by the carrying out of the public purpose, the enhancement or depreciation shall be set off against, or added to, the compensation otherwise payable.

Section 23(2) — the no-scheme rule

This is the principle valuers call the “no-scheme” or Pointe Gourde rule. You are paid for what the land was worth without the project, not for the value the project itself created. Land in the path of a new highway is not valued as highway frontage.

Note the asymmetry with subsection (3): the scheme’s effect on the acquired land is ignored, but its effect on your remaining land is set off or added.

Section 24 — defence and navigation works

Where, for a purpose connected with the defence of Papua New Guinea, securing public safety, or navigation or the safety of navigation by land, air or water, the State, a former administration, another government or a person acting for them has done work on or in relation to land, or placed anything on, under or over land, and the land is later compulsorily acquired —

the value of the land is assessed without reference to the enhancement or depreciation arising from that work or thing.

This matters in Papua New Guinea more than it might elsewhere, because of wartime and post-war works, airstrips and navigation installations placed on land long before any acquisition.

The constitutional overlay

Section 53(2) of the Constitution requires that just compensation be made on just terms by the expropriating authority, giving full weight to the National Goals and Directive Principles and having due regard to the national interest and to the expression of that interest by Parliament, as well as to the person affected.

Section 53(3) adds that compensation is not to be treated as unjust solely because of fair provision for deferred payment, payment by instalments, or compensation otherwise than in cash.

Building the claim

1. A valuation as at the date of acquisition, on the no-scheme basis.
2. Proof of your interest as at that date — title, lease, mortgage, or evidence of customary rights.
3. Evidence of severance damage — what the remainder is worth cut off, and what it was worth whole.
4. An honest treatment of enhancement. Ignoring betterment invites the State’s valuer to raise it later, which is worse.
5. Records of loss and expenditure from the notice to treat onwards.