By: Amanda Douglas
Published: 20/11/2012

Many landowners in the central city have now received letters from CERA, the Canterbury Earthquake Recovery Authority, informing them that their land in the central city has been designated for Anchor Projects under the Central City Recovery Plan.  This article describes the processes of designation, acquisition and compensation under the CER Act.

Designation

Designation is a planning tool which takes place under the Resource Management Act.  Certain entities, including CERA, are "designating authorities", and may give notice to the City Council to place a designation on property.  When property is designated for a particular purpose, the designating authority is not required to follow the rules of the underlying zoning in the City Plan.  The designation provides an alternative set of rules for land use on the designated land.

The designation process has already occurred, in relation to The Anchor Projects in the Central City Recovery Plan. When CERA released the Central City Recovery Plan (CCRP) in July 2012, it included a direction to the City Council to designate certain land for the Anchor Projects.

The Anchor Projects

The Recovery Plan list 17 Anchor Projects, including a Justice and Emergency Services Precinct, a Performing Arts Precinct, the Metro Sports Facility, a new Stadium, the Bus Interchange, the Innovation Precinct, the Convention Centre Precinct, the Retail Precinct, the Health Precinct, and the Frame.  In order for some of these Anchor Projects to be developed, the land will need to be acquired by CERA. 

One project which will result in a large amount of land being acquired by CERA is The Frame.  This is a large area of land on the eastern and southern boundaries of the new Central City Business Zone, running between Tuam and St Asaph Streets in the south, and between Manchester and Madras Streets in the east.  It is intended that the Frame will create a lower density greenspace area, with campus style development, and provision for walking and cycling.  In order to accomplish that aim, it is likely that the land will have to be acquired by CERA.

Voluntary Acquisition through negotiation

The Central City Development Unit (CCDU) of CERA has written to many owners of land in The Frame and other Anchor Projects, informing them of the designation, and of the Crown's intention to acquire the properties in areas that are needed for the Anchor Projects.

CERA has the ability, under the CER Act, to compulsorily acquire land.  However, it appears that the process of compulsory acquisition has not yet been commenced. Rather, the Crown has simply begun a voluntary process whereby it will try to reach agreements with landowners for the sale of land to CERA at an agreed value.

If such agreements cannot be reached, then CERA is likely to commence and carry through the process of compulsory acquisition, leaving property owners to make claims for compensation under the Act. The CCDU has indicated to some landowners that negotiations for voluntary acquisition may take place up until the end of December 2012, after which time it intends to take land by compulsory acquisition.

However, the CCDU has also stated that these timings are "indicative" only.  There is nothing in the Act which imposes such a deadline.  The timings appear to have been imposed arbitrarily by the CCDU, without reference to the fact that many landowners are still waiting to receive information necessary in order to know what a fair value for the property is.

Many landowners have now instructed a valuer to provide them with a valuation for the property.  CERA is also obtaining valuations for the properties to be acquired.

There is considerable uncertainty surrounding the question of correct valuations for the purpose of CERA acquiring land in the CBD.  Unlike residential acquisitions under the CER Act, where the 2007 rating valuation is being relied upon, the relevant value for central city acquisitions will be "post-quake".  This is because the compensation payable for land which is compulsorily acquired is the current market value at the time of acquisition, ie, post-quakes and post-designation.

Compulsory Acquisition

If CERA does not reach agreements with property owners for voluntary sales of their properties in the timeframe determined by CERA, it will then move to compulsorily acquire properties.  The process for compulsory acquisition is as follows:
  1. The Minister for Canterbury Earthquake Recovery issues a Notice of Intention to Take Land, under section 54 of the Act;
  2. The section 54 notice must be:
    1. published in the Gazette, and
    2. publicly notified twice, and
    3. served on the owner of the land, and
    4. served upon persons with a registered interest in the land.
  3. The Minister must lodge a copy of the relevant Gazette notice with the Registrar-General of Land, who must register the notice against the land title affected;
  4. The Minister then recommends that the Governor-General issue a Proclamation to take the land;
  5. The Governor-General by Proclamation declares that the land is taken in the name of the Crown;
  6. The Proclamation is published in the Gazette and publicly notified within 1 month of its making; and
  7. 14 days after the Proclamation is published in the Gazette, the land becomes vested in the Crown. 
So, once the process of compulsory acquisition of the property has commenced, it could occur over quite a short time frame.  If all of the steps identified above are taken as expeditiously as possible, the land could be vested in the Crown in as little as a month after the section 54 notice is issued.

Once land has been compulsorily acquired, any person who has suffered loss as a result of the acquisition may lodge a claim for compensation from the Crown.  Such a claim must be lodged within 2 years of the acquisition.

Compensation

The basis upon which compensation will be paid for non-residential land which is compulsorily acquired under the CER Act is quite uncertain at this time.  

Section 64 of the Act provides that claims for compensation are to be determined by the Minister:
  • having regard to the current market valuation of the land at the date of the compulsory acquisition, as determined by a valuation carried out by a registered valuer; and

  • so far as practicable, in accordance with the relevant provisions of Part 5 of the Public Works Act 1981.

There is a large body of law relating to the compensation which is payable for land taken by compulsory acquisition under the Public Works Act 1981. However, despite that reference to the Public Works Act, the CER Act appears to have created quite a different regime for compensation.

Under the Public Works Act, the owner of land which is compulsorily acquired is entitled to full compensation for that land.  The Courts have held that such compensation should place the claimant in the position he would have been in but for the acquisition.  The Public Works Act explicitly enables many types of compensation for loss or damage, such as disturbance payments, business loss, loss on repayment of mortgage, compensation for tenants of residential and business premises, and compensation for land for which no general demand exists. Assistance for the purchase of a new dwelling farm, commercial or industrial property is available under the Public Works Act.

In contrast, the CER Act confines compensation to "actual loss", and specifically excludes the following types of loss:

  1. a loss by an insurer arising from a liability to indemnify;
  2. any part of a loss that is insured;
  3. any part of a loss that ought reasonably to have been insured;
  4. a consequence of regulatory change arising from the operation of this Act causing loss;
  5. cancellation of an existing resource consent that has already been exercised;
  6. cancellation of an existing use right (that is, a right under the Resource Management Act to carry on an existing activity in breach of that Act or rules in the district plan);
  7. economic or consequential loss;
  8. loss of personal property exceeding $20,000 in value;
  9. business interruption;
  10. any other loss that the Minister reasonably considers is unwarranted and unjustified.
The flavour of the compensation provisions in the CER Act seems to be a step away from the more generous regime which is available under the Public Works Act.  Determining the correct valuation for loss to be compensated under the  Act will be challenging.

For example, it may be argued that there is no real market for land which has been designated for Anchor Projects, so that the current market valuation at the time of acquisition could be much less than the property was worth prior to the earthquakes.  Arguably, that difference in value could be excluded from the definition of recoverable loss on the basis that it is "a consequence of regulatory change arising from the operation of this Act causing loss".

If that approach is taken by CERA, then the compensation being offered through the voluntary acquisition process may be well below what property owners will find acceptable, and that may prevent voluntary sale agreements being reached.  Property owners in that situation are likely to have their land compulsorily acquired by CERA, and will then have to lodge a claim for compensation in order to recover the value of the property.

The compensation claim process could only yield a higher result if there was a sound legal and evidential basis for disputing the amount of actual loss, including the value ascribed to the property, by CERA and the Minister.  A claimant is entitled to appear before the Minister to make representations as to the nature of the claim and the amount of compensation payable, before the Minister determines the claim.  The Minister's decision may be appealed to the High Court.

Conclusion

The central city rebuild presents our clients with many challenges and opportunities.  Processes which occurred once in a blue moon before the earthquakes will soon be everyday occurrences.  A thorough understanding of those processes, and the way in which they are being used, will assist our clients to make the most of the rebuild process and build our community back stronger.   Wynn Williams' specialist Christchurch Rebuild Team is available to help.



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