Below Market Compensation for Mandatory Property Aquisition by State Government

focus123 on 09/11/2023 - 17:32
Last edited 09/11/2023 - 18:13 by 1 other user

I am hoping to get advice from anyone who has had to deal with the state/federal government on property acquisitions for infrastructure projects.

Long story short, we have an investment property (2BR Unit in postcode 5033) in Adelaide that is marked for acquisition by the state government to accommodate the North-South Corridor project.

We are okay to let it go if fair compensation is offered.

However, the compensation that the state government offers is $20-$30K below the current sale price of similar properties in the area.

Has anyone successfully challenged the government valuation and won a higher(fair) compensation for their property?

Thanks In Advance.

Home & Garden

Comments

  • freefall101 on 09/11/2023 - 17:41
    +56

    You should watch the documentary “The Castle”, it might give you some great tips.

    What happened when you went back and told them that their offer was $20-30k below other sales in the area and provided examples? And are you cherry picking the highest ones or looking at all similar properties?

    • Jimothy Wongingtons on 09/11/2023 - 18:43
      +17

      Clicked in just to see if someone was going to make a ‘the castle’ reference

      Not let down

      • freefall101 on 09/11/2023 - 19:41
        +23

        I was unreasonable excited to see I was the first person to post a response. I'm going to print out a copy of this thread and put it straight in the pool room.

    • Homr on 10/11/2023 - 22:20
      +1

      It's not a house its a home ya Dhed

      • yokel on 11/11/2023 - 08:09

        Definitely goes against the vibe of native land title

    • us3rnam3tak3n on 11/11/2023 - 15:15
      +1

      Yeah, tell em they're dreaming

  • djkelly69 on 09/11/2023 - 17:43
    +28

    Aren't you almost saving that amount of money not having to pay a solicitor or agent, and other associated costs? Which they may have taken into account?

    Edit: also are you comparing advertised sale prices, or actual sold prices?

    • EightImmortals on 09/11/2023 - 17:51
      +10

      Only if he was planning to sell it anyway. :)

      • MrFrugalSpend on 09/11/2023 - 22:01
        +10

        at first I thought yes, but then you are right - there should be compensation to cover costs on top of the price for the inconvenience of a transaction OP never wanted

        • ronafios on 12/11/2023 - 07:39

          Except it's not an unexpected cost, it's considered a 'brought forward' cost, in that the owner would have to incur it at some point in the future.

          • MrFrugalSpend on 12/11/2023 - 23:02

            @ronafios: No it isn't - see my comment that explains in more detail below - https://www.ozbargain.com.au/comment/14535540/redir
            The costs of a sale are a 'per transaction' cost - you can go 50 years and never incur them then die and your estate does, or incur them over and over every time you sell, or somewhere in between at your choosing. However in this case, OP didn't want to sell - so the most likely scenario is they want to get another equal property to get back to where they were, which means paying the transaction costs baked into the next property's purchase price… and then they would incur them all over again when they sell in future at the time OP actually wanted to sell. The fair outcome is replacement costs including transaction costs.

    • JIMB0 on 09/11/2023 - 18:18
      +18

      To replace it by buying another house would incur stamp duty and other transaction costs. Not to mention the time spent looking, building inspections etc. Although you could offset some of this ransacking the house for anything of value since it's going to get knocked over anyway.

    • HeWhoKnows on 10/11/2023 - 08:19
      +3

      That doesnt come into determining property values.

      However OP can raise an objection with evidence of recent SALES.
      Not For sale!

      Usually wont go far and the only other avenue is the courts which costs a bomb!

      But yes, look under SOLD in real estate.com.au first

      If OP wants to take it further they must start by engaging (at cost) at least 2 professional valuers and present thier reports to the appropriate government body. This may help lift thier offer price if the valuations do justify this.
      However as pointed out above they may argue that selling and legal costs are not incurred in this process.
      But OP can in turn argue for other compensation such as the need to pay stamp duty on the subsequent purchase.

      Good luck!

  • GordonD on 09/11/2023 - 17:44
    +7

    Land acquisition facts sheet - Government of South Australia.

    https://dit.sa.gov.au/__data/assets/pdf_file/0009/946305/Lan…

  • JimmyF on 09/11/2023 - 17:53

    However, the compensation that the state government offers is 20-30K below the current sale price of similar properties in the area.

    Sounds 'fair', considering you don't have to pay Real Estate selling fees, staging fees, photos, legal fees, many even present the place empty so no rent etc.

    So $20k less than what you think it is worth seems like a good deal to me to just have it done without the hassle of the above.

    • MrFrugalSpend on 09/11/2023 - 22:08
      +38

      No - Not fair, OP is not the one initiating a sale didn't need to incur those transaction costs if they didn't want a transaction. Additionally, OP would likely want to replace that asset with one like for like, which if what OP says is true, would involve OP paying the $20-30K more to cover those packaged up into the purchase price for the new property transaction just to get back to where they were (and would still have to pay them again in their ultimate sale of that asset at the time when they wanted to sell it, which means mathematically, your argument is therefore flawed and they are worse off in the end).

      If not acquired, OP may then want to move into it later and not incur those costs and stay there for life.
      Not to mention, the loss of properties stock in an existing housing crises will probably drive up real estate more if OP can't secure another one and with the time without a property in the interim with inflation rates as high as they are will probably lose more capital growth and rent for the gap, may lose out on any lower rate fixed loans they had to re-finance a new one at the new higher rates, and any associated tax adjustments at a time they may not have been planning for = a whole lot of being wronged.

      As for the hassle, OP should arguably be compensated for that too let alone short-changed on the value given the time involved in searching for another, those legal costs to buy it etc.

      Additionally, if they are doing that to an investor, it probably means they are doing it to owner occupiers too - if you re-read the post if it were a homeowner with the added sob story of it being a pensioner losing their home, and being short changed, and never wanted to move - then you'd be outraged…. The only reason a lot of people are negging OP is because of a bias against people who can afford investment rentals. It doesn't change the fact the government should round up a little bit more spare change out of a $15bn project fund for stuffing people around - regardless of who they are.

    • brendanm on 09/11/2023 - 18:08
      +19

      I wish I had more hands so I could give this post 4 thumbs down.

      • The Wololo Wombat on 10/11/2023 - 22:36
        +1

        I thumbs up you for an extra thumbs down for ninohax.

  • SydStrand on 09/11/2023 - 18:32
    +2

    Can easily cost in excess of $20K to sell a house, once the dust has settled, so really isn't that bad at all.

    • nephilim on 09/11/2023 - 20:54
      -7

      a 2 bedroom unit would never cost over 20k in Adelaide… lol
      commission rates here are 3.5-4%, listing 3-4k, conveyancer 2k

      cost us 12k to sell a 720k house and we used a premium agent with drone shots and such

      • lgacb08 on 10/11/2023 - 01:16
        +22

        Mate, there's something wrong with your math, with that commission rate you quote your house'd have cost north of 30k, not 12k.

        • MrThing on 11/11/2023 - 06:58
          +4

          1+1=potato

      • infinite on 10/11/2023 - 22:06
        +1

        Reddit level maths to go with the imaginary story.

        C c c c c c combo !

    • MrFrugalSpend on 09/11/2023 - 22:10
      +5

      As I said above https://www.ozbargain.com.au/comment/14535540/redir OP would likely want to replace that asset with one like for like, which would involve OP paying the $20-30K more to cover those in the seller's new transaction to get back to where they were, so the costs of a transaction are not relevant if OP wants to just not be aggrieved.

      There should be compensation $20-30K over for the inconvenience of having your property taken from you against your wishes, let alone penny-pinching $20K from property owners who were minding their own business in what is probably a many billions of dollars project!

      • Jolakot on 11/11/2023 - 15:30

        Only if it was slated for future acquisition while you owned it, if you buy a house that will eventually be acquired then you've done so at your own risk.

    • MrFrugalSpend on 09/11/2023 - 22:12
      +1

      nice find

    • onetwothreefour on 10/11/2023 - 07:29
      +17

      Maddens is offering to assist

      Aren't they a kind bunch of people, I bet they won't charge OP much for this.

      • infinite on 11/11/2023 - 09:51
        -1

        Maddens have been representing low and middle class folks in compulsory land acquisition cases and class action suits against state government's since the early 80's. They are absolutely legit in that field of law and do act & charge reasonably from my experience doing work along side them.

        Having said that, OP should go and seek independent legal advice from a property lawyer of their own choice. Even just the free initial meeting/consult they get will provide them with a great deal of information to think about in terms of what they should be entitled too under these circumstances & what the costs are likely to be for them depending on how far they wish to go in seeking fair compensation. State governments in SA have a long and ugly history of ripping people off in compulsory acquisition cases via significantly low-balling them & not applying the law properly when making offers on land under these circumstances.

        OP's rental investment for example is earning them an income while also increasing in value at a conservative estimate of around 15% a year based on rentals in that postcode. Is the government's offer taking any of that into account? The government doesn't have to take into consideration a land owners feeling or any possible mental grief caused by the process, but they do have to offer a fair and reasonable market rate, on top of consideration for any financial or commercial impacts. Property values in SA have been booming for years now and nothing is likely to stop that any time soon, with the state's population likely to crack 2 million within 18 months. The longer a land owner hold's out and negotiates or enforces their legal rights in these type of circumstances, the more they get as compensation too.

        It's all food for thought, OP will have to decide what's best for themselves and their family. I hope it works out to their advantage in the end.

  • Kongzi on 09/11/2023 - 19:13
    +4

    High ball em. You deserve the max plus more

  • Dollar General on 09/11/2023 - 19:25
    +7

    Dig up your backyard and test for lithium, copper or uranium. Will increase the valuation substantially

    • JIMB0 on 09/11/2023 - 23:11
      +13

      What do you know about lead?

    • infinite on 11/11/2023 - 09:56

      Unfortunately with freehold property in Australia, you only typically own about 5m-15m under the soil depending on the state you live in. The only thing of value you'll find at those depths are water, comm's cables and sewage pipes :)

  • Drakesy on 09/11/2023 - 19:29

    However, the compensation that the state government offers is $20-$30K below the current sale price of similar properties in the area.

    This you have year/no beds, no baths, no cars, renovation job, location (always slightly different) not to mention the house prices would likely drop once there's a hwy through there

    Unless one in the block sold recently it's your word against theirs, i have heard though in some cases (large swaths of land where the farmer was seriously displaced) they got 20% above value per m2

    • derrida derider on 11/11/2023 - 13:30
      +2

      With that 20% you are probably thinking of the solatium (that's the legal term) that is payable if the owner is living on the property, to compensate for the extra inconvenience of them having to move home. For investment properties there is typically a small solatium paid to the tenants, but none for the landlord.

  • ihbh on 09/11/2023 - 19:45
    +2

    Only negative is that you'll possibly incur CGT at a time not of your choosing - e.g. in retirement when your MTR is lower.

    • MrFrugalSpend on 12/11/2023 - 23:08

      i don't think it is the only negative, but yes it is one

  • ihbh on 09/11/2023 - 19:47
    -1

    $20-$30K below the current sale price of similar properties in the area

    For sale price <> sold price. With a bit of negotiation, the price they offered could be spot on. And this doesn't take into account selling costs and small reno costs like a repaint, etc.

  • AndyC1 on 09/11/2023 - 19:50
    +1

    Does the 20 - 30K include the costs that selling a property? If not then may be you should lookup the costs of selling a property and take this into consideration.

  • Some Human on 09/11/2023 - 20:03
    +16

    Tell em they're dreamin'

  • AustriaBargain on 09/11/2023 - 20:07
    +3

    You bought an investment property in Richmond?!

    • infinite on 11/11/2023 - 10:20

      OP made a very good choice investing in that postcode.

      Annual rate of land value increasing at a minimum of 15%, only 2km-4km from the CBD, excellent private and public schools around the area, direct bus routes to the city, plenty of shopping centers near by, close to hospital, close to multiple universities, easy bus access to the train station, 5min to the airport, 10min drive to the beach, nearly 50% of the properties in the entire area are rentals already, average socio/eco breakdown for the areas in the postcode are single childless professionals earning over 100K.

      They clearly did their research.

  • Nugs on 09/11/2023 - 20:07

    How does it compare to the rates valuation?
    .

    • SlickMick on 10/11/2023 - 09:46
      -1

      Gov only wants the land. OP is lucky they aren't giving them land valuation and telling them to get everything off the land. :)

  • ausginnygin on 09/11/2023 - 20:38

    Better call Saul for any compensations.

  • Hardlyworkin on 09/11/2023 - 21:38
    +6

    Does that mean you can trash the joint before you move out? Ozbargain party?

  • USER DC on 10/11/2023 - 00:12
    -4

    techincally speaking state government doesnt even need to pay $1 even to acquire property they can just take it with any new law

    Its just a bloody harsh reality of having too many properties. If it was your main home, may be could have asked them for a new reallocation place to stay ? of similar size and freedom of land but again gonna be a massive headache

    • SlickMick on 10/11/2023 - 09:47

      that would be a harsh reality

  • loropy9 on 10/11/2023 - 00:50
    +5

    OP, you could pay ~$300 for property valuation and use it to dispute the amount they are offering you. The state government is forcing you to sell your investment, meaning that you will have to buy another one elsewhere. Meaning you will have to pay stamp duty on your replacement property. To the state government. Meaning they are having you over twice.

    • focus123 on 11/11/2023 - 10:22

      The state government is offering to cover the costs to acquire a simila replacement property at a similar or below the acquisition price.

  • SBOB on 10/11/2023 - 07:06
    +2

    Market value plus stamp duty waiver on replacement property purchased (with reasonable time frame and price bracket)

    Seems that should be some kind of expected minimum if their aim is to not disadvantage the owner as part of the acquisition.

  • elgrande on 10/11/2023 - 07:26
    +3

    Don't forget your property value has decreased because its going to be acquired.

  • ForkSnorter on 10/11/2023 - 09:04
    +4

    $20-$30k is such a negligible amount in today's market. Claiming your house is worth $20-$30k more is very subjective. Tiny little details could make your house more or less attractive to a seller. Your house is worth what people offer for it. It could be worth $100k more depending on who wants it. Or it might get $50k less than you ask for it. It would be very hard to prove such a negligible amount.

  • Love a bargain on 10/11/2023 - 13:07
    +6

    To challenge the market value of your current IP, you can point to actual sale prices, or get a property valuation done (similar to one that a bank would commission before approving a home loan).

    Also note the following (https://www.lawhandbook.sa.gov.au/ch28s02s10s03.php):

    The authority may also make a payment (up to the sum of $10,000) to the land owner for payment toward professional costs relating to the acquisition of the land, including legal costs, and valuation costs [Land Acquisition Act 1969 (SA) s 26B].

    and

    If the authority has acquired land under the provisions of the Land Acquisition Act 1969 (SA) and the person who was the owner of the acquired land has purchased other land to replace the acquired land (within 24 months of the land acquisition (principal place of residence) or 12 months in any other case) the authority may pay transfer costs in relation to the purchase of the replacement land (i.e. stamp duty, transfer registration fees etc.) [see Land Acquisition Act 1969 (SA) s 26D(2)]. An application for payment of the transfer costs in relation to the replacement land must be made within 24 months of the land acquisition by the authority [s 26D(3)(b)], and the replacement land must be generally similar in nature to the acquired land and purchased in the same ownership structure as the acquired land [see Land Acquisition Act 1969 (SA)s 26D(4) and Land Acquisition Regulations 2019 (SA) r 15].

  • pndl on 10/11/2023 - 15:16
    +1

    Speak to a lawyer straight away, there are time limits and prescribed processes to contesting valuation. May cost you few hundred to send a letter, but easily worth it if you can get 5 figures back. The government has room to move on the price.

  • StingyBritches on 10/11/2023 - 19:16
    +1

    Isn’t the usual game that the Government offer a price and the land-owner then makes a counter offer?

  • itsme56 on 10/11/2023 - 21:06

    They should give you free stamp duty for your next property. Not fair if youre forced to move you'll be taxed to buy a new property.

    • GordonD on 10/11/2023 - 21:32
      +1

      They do.

    • derrida derider on 11/11/2023 - 13:36

      They do, plus this is an investment property anyway not OP's home. If OP was living in it the law says they would have to offer more to compensate for the move.

  • Dabbler68 on 10/11/2023 - 22:35

    An interesting link by Love a Bargain. So as mentioned earlier, you probably have to pay CGT, which means you have less money to get a replacement property. Then you need to pay the purchase expenses (hopefully claim those back), find new tenants,etc. Sure, the CGT clock starts again, but you have to outlay quite a bit to get back to where you were.

    • leiiv on 11/11/2023 - 01:32
      +5

      You can rollover the CGT.
      https://www.ato.gov.au/Individuals/Capital-gains-tax/CGT-eve…

      • focus123 on 11/11/2023 - 10:28
        +1

        Thank you for this ATO link, yes we are set to gain some profit from this acquisition and I was wondering how to reduce or delay the CGT.

      • Dabbler68 on 11/11/2023 - 10:59

        Great news for the OP. The best piece of info on this thread, along with the potential refund of transfer duty. On that basis it actually may be a benefit to have the property acquired because it opens the possibility of getting a similar but better located replacement.

  • plmko on 10/11/2023 - 22:42

    Nekmnit….after all that back and forth we enter recession and property prices drop $20k-$30k

    • Homr on 11/11/2023 - 08:10

      When will we enter recession?

    • mousie on 11/11/2023 - 20:11

      No the infrastructure project gets cancelled

  • StalkingIbis on 11/11/2023 - 08:46
    +1

    the other people who are currently selling had to pay for a real estate agent etc.

    just take the hassle free sale.

    • kaleidoscope on 12/11/2023 - 00:30

      It's only one sided argument to this.

  • WhyAmICommenting on 11/11/2023 - 08:54
    +1

    I believe they should pay for an independent agent to act on your behalf to get appropriate compensation - just happened to a mate in Qld and the agent scored him at least another 20k (at no cost to him).

  • Thorn69 on 11/11/2023 - 10:34

    is it written in as mandatory? in the acquisition notice? if it is mandatory is only just that if you agree to it other wise its just coercion in a legal sense the government use weasel words with double meanings to compel you ,just proceed with caution get some lawyers involved and hold on with diamond hands your in an area that will appreciate year on year and your going to get robbed otherwise

  • llllllllllllll on 11/11/2023 - 10:34
    -1

    I suppose we are all collectively paying the OP for the extra they wants, via tax $?

    • MITM on 11/11/2023 - 11:08

      Just you’re 2c worth.

  • MITM on 11/11/2023 - 11:13

    CGTax is probably a bigger concern

  • joelmuzz on 11/11/2023 - 14:42
    +1

    If it was a long existing transport corridor then it was never worth the same as other properties in the area, since like an easement the inevitable future acquisition devalues a property.

  • McBanjo on 11/11/2023 - 16:26

    Take the offer. You don't want them to come back with a 2nd market offer after the property values have dropped because things in the area are marked for state acquisition.

  • SpotTheOzzie on 11/11/2023 - 20:03

    I have a core logic subscription.

    Happy to run your address through RP data to give you an evaluation.

  • Trying2SaveABuck on 12/11/2023 - 08:16

    Tell em theyre dreaming

  • Oofy Doofy on 12/11/2023 - 14:39

    They're offering you less because they figure if you sold it through an agent, it would cost you as much in $.

    I would take the offer TBH, make it nice and easy.

  • ibvff on 17/11/2023 - 16:08
    +2

    Get a lawyer familiar with the legislation/process. The government will reimburse your legal/valuation costs.

    Essentially your lawyer (get one specialising in this process) will engage a valuer and you need to get them to put a $ value on your property. That figure will be above the Gov agency and from there you can negotiate a better offer.

    Do not take their initial offer.

  • focus123 on 06/05/2024 - 12:07
    +2

    Hi, I thought to give an update on this.

    We hired a lawyer and the lawyer arranged an independent property evaluator.
    The independent evaluator came up with a valuation 20k higher than the government valuation (the heat in the property market may have helped a bit here).

    The next step in the process was to have a joint valuer conference ( Which is a meeting with our assessor and the government assessor to come to a middle ground).
    However, our lawyer advised us not to go ahead with that as based on his experience the government assessors won't budge.
    The lawyer charged for 3.5hrs for his total service at $490 per hour rate.

    We terminated the contract with the lawyer and contacted our assessor directly to organize a joint valuer conference (it was a meeting that took 30-60 minutes).

    The joint valuer conference went ahead successfully and the government agreed to increase their valuation by 15,000 dollars.

    The cost for an independent valuer was less than $1000
    So the overall process cost us about $2500 (re-imbursed by the government as it was triggered by their need to acquire our property), but we gained $15,000 in return.

    Things to take out from this;
    1. You don't need to have a lawyer to arrange an independent property valuation.
    2. If you feel your lawyer doesn't work in your best interest, terminate their contract immediately.

    • StingyBritches on 06/05/2024 - 12:14
      +1

      Thanks for coming back to share your results. Glad it worked out for you, and grateful you came back to share this with us.

      • focus123 on 06/05/2024 - 12:22

        Thanks,
        Plus we have requested from the government to defer the contract signing until July to get the benefit of Stage 3 tax cuts for the capital gains of this sale.

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